The United States has one of the most developed and extensively documented crypto tax frameworks among major economies.
The Internal Revenue Service (IRS) treats cryptocurrency and other digital assets as property for federal income tax purposes, a position first established by Notice 2014-21 and subsequently reinforced by multiple rounds of guidance. This property classification means that general tax principles applicable to property transactions, including the recognition of capital gains and losses on disposal, apply to crypto transactions in the same way they apply to stocks, real estate, and other investment assets.
The IRS has continued to refine its guidance through a series of Revenue Rulings, Revenue Procedures, and final regulations. Final regulations published on 28 June 2024 established comprehensive broker reporting obligations for digital asset transactions, requiring brokers to file information returns and furnish payee statements on disposals of certain digital assets for customers.
A further set of final regulations published on 27 December 2024 extended these reporting obligations to DeFi brokers. From 1 January 2025, brokers must report digital asset transactions on Form 1099-DA, creating a new third-party information reporting trail that significantly increases IRS visibility into crypto activity.
Capital Gains Tax Rules
Every sale, exchange, or other disposition of cryptocurrency gives rise to a capital gain or loss for US federal income tax purposes.
The gain or loss is calculated as the difference between the amount realised on the disposition (the proceeds) and the taxpayer’s adjusted basis in the asset (generally, the original acquisition cost plus any adjustments). Where cryptocurrency is exchanged for another digital asset, it is a taxable exchange, not a like-kind exchange, and gain or loss must be calculated and recognised at the time of the trade.
Rev. Proc. 2024-28 and Notice 2025-7 provide guidance on allocating basis in digital assets to specific wallets or accounts as of 1 January 2025, which is important for taxpayers using the specific identification method to optimise their basis allocation.
How CGT is calculated
The character of the gain depends on the taxpayer’s holding period for the specific units disposed of. Units held for one year or less are short-term capital assets; their disposition gives rise to short-term capital gains taxed as ordinary income at the taxpayer’s marginal rate (up to 37% for 2025).
Capital losses may be deducted against capital gains in the same year. Net capital losses exceeding gains in a given year may be deducted against ordinary income up to a limit of $3,000 per year, with any excess carried forward indefinitely.
There is currently no wash sale rule that applies to digital assets (unlike equities), meaning that a taxpayer can sell a crypto position at a loss and immediately reacquire the same asset without losing the tax benefit of the loss, though this position may change with future legislation.
Record keeping
Taxpayers must track, for each unit of each digital asset held, the acquisition date, acquisition cost (including fees), disposal date, and disposal proceeds.
Where multiple units of the same asset are held at different cost bases, the taxpayer may choose a cost basis method, FIFO, HIFO, specific identification, or other permitted methods, subject to the basis allocation rules in Rev. Proc. 2024-28. Records must be maintained in sufficient detail to substantiate each transaction reported on the tax return.
Income Tax Rules
Where crypto is received as compensation, it is treated as ordinary income at the fair market value of the asset in US dollars at the time of receipt. This income is subject to the taxpayer’s applicable marginal income tax rate, which for 2025 ranged from 10% to 37%. Self-employment income from crypto activity is also subject to self-employment tax (15.3% on net earnings up to the Social Security wage base, 2.9% above it).
Staking rewards received by cash-method taxpayers are included in income in the year of receipt at fair market value, pursuant to Rev. Rul. 2023-14. This ruling confirmed that staking rewards are taxable in the year received, rejecting the argument that they represent newly created property that should only be taxed on subsequent disposal. Mining income similarly gives rise to ordinary income at the point of receipt, with the fair market value of the mined tokens on the date of receipt constituting the taxable amount.
Airdrops and hard forks are addressed by Rev. Rul. 2019-24, which established that hard forks and associated airdrops give rise to ordinary income where the taxpayer actually receives new cryptocurrency and has dominion and control over it. The fair market value of the tokens at the time of receipt is the relevant income amount.
Mining and Staking Treatment
Mining
Cryptocurrency received through mining constitutes ordinary income at the fair market value of the tokens on the date of receipt.
For individual miners not operating as a business, this income is generally reported as self-employment income and is subject to both income tax and self-employment tax.
Business miners may deduct qualifying mining expenses against mining income under the standard business expense rules of the Internal Revenue Code. For hobby miners, the hobby loss rules of IRC Section 183 limit the deductibility of expenses.
When mined tokens are subsequently sold or exchanged, the disposal gives rise to a capital gain or loss calculated as the proceeds less the basis (which equals the fair market value at the time of mining receipt, already included in income).
The holding period for capital gains purposes begins on the date the tokens are received. Miners must therefore track not only the current market value of their holdings but also the income value recognised at each point of mining receipt.
Staking
Rev. Rul. 2023-14 confirms that staking rewards received by cash-method taxpayers are includible in gross income in the taxable year of receipt at fair market value.
This settled a period of uncertainty following litigation in the Jarrett case, and establishes a clear rule for most individual stakers. The ordinary income recognised on receipt becomes the tax basis of the staked tokens; any subsequent gain on disposal is a capital gain.
For DeFi staking, liquidity provision, and yield farming, the IRS has not issued specific guidance beyond the general property and income treatment framework as of 2026.
The 2024 DeFi broker final regulations require certain DeFi protocols to report as brokers, but the income tax treatment of the underlying DeFi returns for investors remains governed by general principles. Taxpayers engaged in complex DeFi strategies should maintain granular records of all token inflows, outflows, and values.
NFT Taxation
NFTs are treated as digital assets for US federal tax purposes.
Notice 2023-27 provides that certain NFTs should be treated as collectibles for purposes of the higher 28% long-term capital gains rate that applies to collectibles (under IRC Section 1(h)(4)), where the NFT is backed by or represents a collectible such as fine art, gems, or antiques. The determination is made on an “if the NFT represents a right to a collectible” basis, and the IRS indicated that further guidance would be issued. Until definitive guidance is released, taxpayers holding NFTs that may qualify as collectibles should consider the potential application of the 28% rate.
For NFTs not qualifying as collectibles, the standard capital gains rates (0%, 15%, or 20% for long-term; ordinary income rates for short-term) apply to gains on disposal. The gain is the difference between disposal proceeds and the adjusted basis (acquisition cost plus fees). Where an individual creates and sells NFTs as part of a business or trade, the proceeds are ordinary business income, and expenses attributable to creation and sale are deductible.
VAT does not apply in the US federal tax system, though state and local sales taxes may in principle apply to certain digital asset transactions depending on the state. Several US states have begun addressing the sales tax treatment of NFTs and crypto transactions, and taxpayers in high-tax states should monitor their state’s specific guidance.
Reporting Requirements
All US taxpayers are subject to US federal tax reporting obligations with respect to digital assets. Capital gains and losses from crypto disposals are reported on Form 8949 and aggregated on Schedule D of Form 1040. Ordinary income from crypto is reported on the relevant income schedule (Schedule C for business income, Schedule 1 for other income).
From 1 January 2025, brokers (including crypto exchanges) are required to report customer transactions on Form 1099-DA, which will pre-populate transaction data in taxpayer records in a manner analogous to stock broker reporting on Form 1099-B.
The final regulations also require DeFi brokers to file information returns from a compliance date that is expected to be phased in. This new reporting infrastructure substantially increases IRS third-party data on crypto transactions.
All digital asset transactions must be valued in US dollars at the time of the transaction. The IRS requires the use of fair market value, which for exchange-traded assets is generally the published exchange rate at the time of the transaction. For less liquid assets, a reasonable valuation methodology must be documented and consistently applied.
FinCEN reporting obligations may apply where a taxpayer has interests in foreign digital asset accounts: Notice 2020-2 indicates that the Report of Foreign Bank and Financial Accounts (FBAR) may apply to foreign virtual currency accounts, and taxpayers with such accounts should monitor ongoing guidance.
Form 8938 (FATCA) may also require disclosure of interests in foreign financial assets including digital assets where threshold amounts are exceeded. Records of all digital asset transactions must be retained for a minimum of three years from the date the relevant tax return is filed (longer in cases of substantial omissions).
Penalties
The IRS imposes significant penalties for failures related to digital asset reporting. Accuracy-related penalties under IRC Section 6662 apply at 20% of the underpayment of tax attributable to negligence or substantial understatement of income. Where the underpayment is attributable to fraud, the penalty is 75% of the underpayment under IRC Section 6663. Civil fraud penalties apply where the IRS can demonstrate intentional disregard of tax laws.
Interest accrues on unpaid tax at the federal short-term rate plus 3% per annum (compounded daily) from the original due date of the tax return. Late filing penalties under IRC Section 6651 are calculated at 5% of the unpaid tax per month (up to 25%), and a separate failure-to-pay penalty of 0.5% per month applies to unpaid tax after the due date.
The IRS Voluntary Disclosure Program (VDP) is available to taxpayers who have undisclosed crypto income, including unreported foreign crypto accounts.
Participation in the VDP before the IRS commences an examination provides significant protection against criminal prosecution and can result in reduced civil penalties. The IRS has identified crypto non-compliance as a priority enforcement area, and with Form 1099-DA reporting now in effect, the scope for undetected omissions is materially narrower than in prior years.
