Last updated: October 18, 2026 · Applies to the 2026 tax year (returns filed in 2027)
If you bought, sold, swapped or earned crypto in 2026, you have to report it on your federal tax return. The process is the same as for stocks in most respects: every sale or swap is a capital gain or loss that goes on Form 8949 and Schedule D, and crypto you earned (staking, airdrops, payment for work) is ordinary income. What is new this year is that most US exchanges now send you and the IRS a Form 1099-DA, so the IRS can compare what you report with what your broker reported.
This guide walks you through the whole process in seven steps, with a full numeric example at the end.
Key takeaways
- Selling crypto for dollars, swapping one coin for another and paying for things with crypto are all taxable events.
- Buying crypto with dollars, holding it and moving it between your own wallets are not taxable.
- Gains on crypto held more than one year are taxed at 0%, 15% or 20%; held one year or less, at your ordinary income rate.
- Staking rewards and other crypto income are taxed as ordinary income when you receive them.
- For 2026, report digital asset sales on Form 8949 using the new boxes G–L, not the boxes used for stocks.
- Form 1099-DA often shows no cost basis for coins bought before 2026. You still have to report the correct basis yourself.
Step 1: Identify your taxable events
The IRS treats cryptocurrency as property, not currency. Any time you dispose of it, you realize a gain or loss equal to the difference between what you received and your cost basis (what you paid, including fees).
| Activity | Taxable? | How it is taxed |
|---|---|---|
| Selling crypto for US dollars | Yes | Capital gain or loss |
| Swapping one crypto for another (e.g. ETH for SOL) | Yes | Capital gain or loss on the coin you gave up |
| Paying for goods or services with crypto | Yes | Capital gain or loss |
| Receiving staking rewards | Yes | Ordinary income when you gain control of them |
| Getting paid in crypto for work | Yes | Wages or self-employment income |
| Buying crypto with US dollars | No | Sets your cost basis |
| Holding crypto | No | Nothing to report until you dispose of it |
| Moving crypto between your own wallets or accounts | No | Keep records: your basis moves with the coins |
| Receiving crypto as a gift | No (for the recipient) | You generally take over the giver’s basis |
Step 2: Answer the digital asset question on Form 1040
Near the top of Form 1040 there is a yes/no question asking whether, at any time during the year, you received a digital asset or sold, exchanged or otherwise disposed of one. Every filer must answer it, even people who never touched crypto.
- Check “Yes” if you sold, swapped or spent crypto, or received it as a reward, payment, airdrop or income.
- Check “No” if your only activity was buying crypto with dollars, holding it, or transferring it between wallets you own.
Answering “Yes” does not mean you owe tax. It only tells the IRS to expect crypto entries elsewhere on the return. Answering “No” when the true answer is “Yes” is the mistake to avoid.
Step 3: Gather your records and every Form 1099-DA
Download the full transaction history (CSV) from every exchange and wallet you used, not just the ones that sent you a tax form. Then collect the Forms 1099-DA your brokers issued for 2026, which should arrive by mid-February 2027. Our Form 1099-DA guide explains every box.
Two things to know about Form 1099-DA for 2026:
- Cost basis is only required for “covered” coins: digital assets acquired after 2025 in an account at that broker and held there until sale. Coins you bought before 2026, or moved in from another wallet or exchange, are “noncovered”, and the form may show proceeds with no basis.
- Staking rewards are not on Form 1099-DA. You have to track them yourself from your exchange or wallet history.
Brokers can also skip reporting small amounts of qualifying stablecoin sales (up to $10,000 a year in proceeds) and NFT sales (up to $600). Even if they skip them, any gain or loss is still yours to report.
Step 4: Calculate your cost basis, wallet by wallet
Your cost basis is what you paid for the coins you sold, plus fees. If you bought the same coin several times at different prices, you need a method to decide which lots you sold. The default is first in, first out (FIFO): the oldest coins in that account are treated as sold first. You can use specific identification instead if you, or your broker, identify the exact lots at the time of the sale.
Since January 1, 2025, basis must be tracked separately for each wallet or account, not as one pool across everything you own. If you bought ETH on Coinbase and in a self-custody wallet, those are two separate sets of lots. For most people with more than a handful of trades, crypto tax software is the practical way to do this.
Step 5: Report each sale on Form 8949 using the digital asset boxes
Form 8949 now has separate checkboxes for digital assets. Do not use boxes A–F (those are for stocks and other securities). Pick the box that matches what your 1099-DA shows:
| Situation | Short-term (held 1 year or less) | Long-term (held more than 1 year) |
|---|---|---|
| Form 1099-DA shows basis reported to the IRS | Box G | Box J |
| Form 1099-DA shows no basis, or basis not reported to the IRS | Box H | Box K |
| No Form 1099-DA received (e.g. self-custody, DeFi, foreign exchange) | Box I | Box L |
For each sale, enter the description, dates acquired and sold, proceeds, cost basis and the gain or loss. If you use box H or K because the form shows no basis, enter your correct basis in column (e). If the basis on the form is wrong, use adjustment code B. Your crypto tax software can generate a completed Form 8949, and you can attach a statement instead of listing hundreds of trades by hand.
The totals from Form 8949 flow to Schedule D, which combines your short-term and long-term results with any stock trades and calculates your net capital gain or loss.
Step 6: Report crypto income separately
Crypto you receive as income is taxed at its fair market value in US dollars at the moment you receive it, and that value becomes your cost basis for a later sale.
- Staking rewards, airdrops and most other rewards: taxable when you gain control of them (IRS Revenue Ruling 2023-14). For a typical individual, report them as other income on Schedule 1.
- Crypto earned as a freelancer or from a business: report on Schedule C, where it is also subject to self-employment tax.
- Crypto paid by an employer as wages: it should already be included on your W-2.
Step 7: Use your losses
Crypto losses offset capital gains from crypto, stocks or any other capital asset. If your losses exceed your gains, you can deduct up to $3,000 of net capital loss against your other income each year ($1,500 if married filing separately). Anything above that carries forward to future years with no expiration.
Worked example: Sarah’s 2026 crypto taxes
Sarah is single, earns $70,000 in wages and takes the 2026 standard deduction of $16,100. Her crypto activity in 2026:
- Bitcoin: bought 0.5 BTC on an exchange in March 2025 for $20,000 and sold it there in August 2026 for $32,000. Long-term gain: $12,000.
- Ethereum to Solana: bought ETH in January 2026 for $5,000 and swapped it for SOL worth $6,500 in May 2026. Short-term gain: $1,500.
- Staking: received rewards worth $400 when they hit her account.
How she reports it:
- She checks “Yes” on the Form 1040 digital asset question.
- The Bitcoin was bought in 2025, so it is noncovered: her 1099-DA shows the $32,000 proceeds but no basis. She reports it in Box K and enters her $20,000 basis herself.
- The ETH was bought and swapped on the same exchange in 2026, so it is covered: her 1099-DA includes the basis. She reports it in Box G.
- The $400 of staking rewards goes on Schedule 1 as other income.
Her federal tax on the crypto:
| Item | Amount | Rate | Tax |
|---|---|---|---|
| Short-term gain + staking income | $1,900 | 22% (her ordinary bracket) | $418 |
| Long-term gain on Bitcoin | $12,000 | 15% | $1,800 |
| Total federal tax on crypto | $13,900 | $2,218 |
Her taxable income before the long-term gain is $55,800, already above the $49,450 ceiling of the 0% bracket for single filers, so the whole Bitcoin gain is taxed at 15%. Had she held the ETH for more than a year, that $1,500 would also have been taxed at 15% instead of 22%. State income tax, if her state has one, comes on top.
Common mistakes to avoid
- Reporting only what is on Form 1099-DA. Self-custody wallets, DeFi and many foreign platforms do not issue one, but those trades are still taxable.
- Leaving basis at zero. If you copy a 1099-DA with no basis without adding your real cost, you will pay tax on the full sale price.
- Forgetting crypto-to-crypto swaps. No dollars changed hands, but each swap is a sale.
- Double-counting transfers. Moving coins between your own accounts is not a sale; make sure your software matches the outgoing and incoming transfer.
- Ignoring small staking rewards. They add up, and their value at receipt is also the basis you need later.
Frequently asked questions
Do I have to report crypto if I didn’t sell?
If you only bought and held, there is no gain or loss to report and you can answer “No” to the digital asset question. If you earned crypto (staking, airdrops, payment), you must report that income even if you never sold.
What if I lost money on crypto?
Report it. Losses reduce your other capital gains, and up to $3,000 of net loss per year reduces your ordinary income, with the rest carried forward.
My 1099-DA proceeds don’t match my records. What should I do?
Report what is correct according to your records, keep documentation, and use the appropriate Form 8949 box and adjustment code. If the broker’s form is clearly wrong, you can also ask the broker for a corrected form.
Do I need a CPA for crypto taxes?
Not necessarily. If your activity is a few buys and sells on major exchanges, tax software can handle it. If you used DeFi, many wallets, or have years of unreported activity, a CPA or enrolled agent with crypto experience is worth the cost.
Sources
- IRS: Instructions for Form 8949
- IRS: Instructions for Form 1099-DA
- IRS: Digital assets
- IRS: Revenue Ruling 2023-14 (staking rewards)
- IRS: Revenue Procedure 2024-28 (wallet-by-wallet basis)
This article is for educational purposes only and is not tax, legal or investment advice. Tax rules depend on your individual situation; consult a qualified tax professional before filing.