Most countries tax cryptocurrency, and most tax authorities now receive data from exchanges. The rules differ from place to place, but the core ideas are similar: selling or swapping crypto at a profit is usually a taxable gain, and crypto you earn is usually income. This guide explains the general principles, using the United States as the main example. It is general education, not tax advice.
Crypto Is Usually Treated as Property
In the United States, the Internal Revenue Service has treated virtual currency as property since Notice 2014-21.
The practical result is that tax is triggered by events. Each time you dispose of crypto, you compare what you received with what the coins cost you.
What Is Usually Taxable
- Selling crypto for dollars or another government currency
- Trading one crypto for another, including swaps on a decentralized exchange
- Paying for goods or services with crypto
- Receiving crypto as payment for work
- Receiving mining or staking rewards
- Receiving an airdrop
The first three are disposals. They create a capital gain or loss. The last three are income, valued at the market price when you receive the coins.
What Is Usually Not Taxable
- Buying crypto with government currency and holding it
- Moving crypto between wallets or accounts that you own
- Receiving crypto as a genuine gift, until you later sell it
These are the US positions set out in the IRS frequently asked questions on virtual currency transactions. Other countries can differ.
Capital Gains and Losses
A gain or loss is the sale proceeds minus the cost basis. The cost basis is what you paid for the coins, including fees.
For example, you buy 0.1 BTC for $4,000 and later sell it for $6,000. The gain is $2,000. If you had swapped it for ETH worth $6,000 instead, the gain would be the same, even though no dollars reached your bank.
In the US, the holding period sets the rate:
- Short-term: assets held for one year or less. Gains are taxed at ordinary income rates.
- Long-term: assets held for more than one year. Gains are taxed at lower rates of 0%, 15% or 20%, depending on income.
Losses count too. Capital losses offset capital gains. In the US, if losses exceed gains, up to $3,000 of the excess can be deducted from other income each year, and the remainder carries forward.
Income From Mining, Staking and Airdrops
Crypto that you earn is ordinary income at its fair market value on the day you gain control of it. In 2023 the IRS confirmed that this applies to staking rewards.
That value then becomes your cost basis. If you receive a staking reward worth $50 and later sell it for $80, you report $50 of income when it arrives and a $30 capital gain when you sell.
Cost Basis Methods
If you bought the same coin at different times and prices, you need a rule for deciding which units you sold.
- Specific identification: you identify exactly which units were sold, backed by records. Approaches such as highest-cost-first are forms of this method.
- FIFO (first in, first out): the oldest units are treated as sold first. In the US, this is the default when units are not specifically identified.
Since January 1, 2025, US taxpayers must track basis separately for each wallet or account. Pooling all holdings into one universal list is no longer allowed.
Other countries prescribe their own methods. The UK uses share pooling with same-day and 30-day matching rules. Canada uses an average cost approach.
DeFi Transactions
Guidance on decentralized finance is thin in most countries. Some general points apply:
- A token swap is a disposal, like any other trade.
- Rewards from liquidity mining or lending are generally income when received.
- Depositing tokens into a pool, wrapping a token or bridging may or may not count as a disposal, depending on the country and the details.
Reporting in the United States
The federal income tax return asks every filer a yes or no question about digital assets. Sales are reported on Form 8949 and summarized on Schedule D.
Brokers, including custodial exchanges, must report customer sales to the IRS on Form 1099-DA, starting with transactions made on or after January 1, 2025. The IRS digital assets page explains the forms and current rules.
Other Countries
Treatment varies widely. A few examples:
- Germany: gains on crypto held by a private individual for more than one year are generally tax-free.
- Portugal: since 2023, gains on crypto held for less than 365 days are taxed. Longer holdings remain largely exempt.
- Singapore: no capital gains tax for individuals, though trading as a business is taxed as income.
- United Arab Emirates: no personal income tax.
Rules change often. Tax residency, not citizenship or the location of the exchange, usually decides which country's rules apply.
Records to Keep
- Date and time of every purchase, sale, swap and receipt
- Amount of crypto and its value in your local currency at that moment
- Fees paid
- Which wallet or exchange was involved
Export your history from exchanges regularly. Platforms close, and old records can become unavailable.
Common Mistakes
- Believing that crypto-to-crypto trades are not taxable
- Assuming transactions on decentralized exchanges are invisible to tax authorities
Tax rules change and personal situations differ. Consult a qualified tax professional about your own.
Nothing in this article is financial advice.
Track on CoinMarketGuy
Each coin page, such as the Bitcoin page, shows the live price and a price chart you can use as a rough check against your own records. The converter turns a crypto amount into dollars or other currencies at the current rate. For official filings, use the exact prices and timestamps from your exchange or wallet records.