Because cryptocurrency is an evolving industry with changing tax regulations, compliance issues, and changing landscape that could affect your business, it is important to stay informed about any changes if you do not employ a tax professional to do it for you.
If that’s what you’re choosing to hide, you might assume that cryptocurrencies – whose users can appear completely anonymous – are a place to do so safely. As it turns out, the IRS can trace cryptocurrency transactions just as easily as it traces paper transactions. And, sure enough, it can figure out how ‘anonymous’ wallets are connected to known individuals. Starting in 2026, major exchanges will have to file 1099 forms for their users, compiling detailed records of each user’s capital gains and losses on each asset.
Gain or Loss
These digital currencies qualify as property for tax purposes – just like stocks or real estate. Should you sell your cryptocurrency for a gain, you’ll incur capital gains taxes based on how long you owned it and your tax bracket.
With every mining or sales transaction of an appreciating cryptocurrency asset, capital gains and losses are triggered – and the IRS needs to know.
However, for those who trade Bitcoin, stock market accounts or foreign accounts, some cryptocurrency exchanges will send you a Form 1099-B, 1099-MISC (perhaps for staking rewards) and/or Form 1099-K statements of your cryptocurrency assets and transactions. Many cryptocurrency exchanges do not even know how to report the correct cost basis or amount upon the receipt of a digital asset transaction into your account or the transmission of a digital asset off your account, so if you don’t track this yourself, you are likely to overpay your taxes. One solution is cost basis self-tracking.
Capital Gains
Cryptocurrency and similar ‘digital assets’ get taxed as property when sold or traded with a gain realised.
If you are paid with cryptocurrency for selling goods or services, then its fair market value at the time you received it is what you have to report in your tax records. It doesn’t matter whether this payment was received as a result of mining it, staking it, an exchange platform or any other way.
Transferring crypto in or out of your Coinbase account or another wallet is also taxable, since swapping one crypto for another such as Bitcoin for Ethereum is technically a sale; you’re taxed on the difference between your sale price and your cost basis, which is a capital gain or loss depending on the size of that difference.
Losses
Losses on cryptocurrency investments are treated similarly to those from capital gains; if you sell some crypto for less than you paid, you’ve ‘realised’ a loss, and can deduct it from your taxable income. But to claim any losses against gains or any other sources of income, the losses must be realised.
Casualty or theft are another avenue for deducting losses – say you sent your bitcoin to the wrong address or your exchange account was hacked. If you sell your crypto for cash – or use it to make a payment toward buying a house or a car – those other transactions count as ‘dispositions’ and you can deduct the associated losses as well. You really should work with a tax professional. But you can’t deduct losses stemming from the periodic depreciation of your staking or mining profits, or from the even more frequent preposterousness of digital-asset markets.
Taxable Payments
If you have received a payment in cryptocurrency – as, for example, payment for goods or services rendered, its fair market value on the date and time of receipt should be treated as taxable income.
Moreover, regarding any changes in the taxes for cryptocurrency or related crypto industry, tax practitioners have to constantly be aware of what is going on in regulatory announcements and also from newspapers and other news sources covering crypto, or webinars or professional fora. For instance, tax practitioners can subscribe to newspapers and other news sources covering crypto, or webinars or professional fora as a means of information compliance.
Self-Employment
Tax-wise, Congress must resist giving crypto special treatment on the books while also enforcing the rules and education with taxpayers. Lawmakers should do likewise in rejecting industry lobbying for the carve-outs in the tax rules that would help foster additional investments into an unproven asset class that could ultimately prove to be less secure than more stable channels of exchange.
In principle, all people using crypto should report all income they earn – that is, if a user sells crypto at a price above what it was purchased for, it qualifies as a capital gain or loss, which should be reported; or if crypto is used as currency at an exchange rate above what the user originally paid for it, that also qualifies as income to be reported. Similarly, receiving crypto from mining or staking digital assets also qualifies as income from work and is reportable income (in fact, many exchanges issue income forms, specifically IRS 1099-MISC or 1099-B, to the taxpayer to report these earnings).