How Cryptocurrency is Taxed in the US
In the United States, the IRS treats cryptocurrency as property, not currency, for tax purposes. This means that every time you sell, trade, or dispose of crypto, it is a taxable event subject to Capital Gains tax. Our free Crypto Tax Estimator helps you calculate your potential federal tax liability.
What is a Taxable Event in Crypto?
You owe taxes on your cryptocurrency when you:
- Sell crypto for fiat currency (like USD).
- Trade one crypto for another crypto (e.g., trading Bitcoin for Ethereum). This is a common trap-you owe taxes on the gains of the Bitcoin you traded away, even if you never cashed out to a bank account!
- Use crypto to buy goods or services. If you buy a coffee with Bitcoin, you technically "sold" the Bitcoin to buy the coffee, triggering capital gains.
Short-Term vs. Long-Term Capital Gains
The length of time you hold your cryptocurrency dictates your tax rate:
Short-Term Capital Gains (Held One Year or Less)
If you hold a coin for one year or less before selling or trading it, any profit is taxed at your ordinary income tax rate. This is the same rate applied to your day job\'s salary and can be as high as 37%.
Long-Term Capital Gains (Held More Than 1 Year)
If you hold a coin for over a year, you are rewarded with significantly lower tax rates. Depending on your total income, your long-term capital gains tax rate will be 0%, 15%, or 20%.
2026 reporting, basis and additional tax
Form 1099-DA reporting can involve different gross-proceeds and covered-asset basis rules depending on acquisition and transaction dates. A broker form does not establish that all basis is known, and transferred assets can require your own records. Reconcile transaction history, wallet transfers, fees and holding periods. See IRS digital-asset guidance and IRS NIIT thresholds. This estimator uses the lesser of modeled investment gains or MAGI excess for NIIT; other investment income and loss carryovers are excluded.
Tax-Loss Harvesting
If you sell cryptocurrency for a loss, you can use those losses to offset your gains. If your total losses exceed your total gains for the year, you can use up to $3,000 ($1,500 if married filing separately) of the remaining loss to offset your ordinary income (like your salary). Any losses beyond that $3,000 can be carried forward to future tax years. Unlike stocks, the IRS "Wash Sale" rule currently does not explicitly apply to cryptocurrencies, making crypto tax-loss harvesting a powerful tool.