How to Calculate Crypto Taxes for Gains and Losses 2026

To calculate crypto taxes, use one formula on every taxable sale, swap, or spend: proceeds minus cost basis. For crypto you earned, report the fair market value when you received and took control of it. That value becomes the starting basis if you later dispose of it.

In the US, the IRS treats digital assets as property. Buying crypto with dollars and holding it is not, by itself, a tax event. Selling, swapping, spending, or earning it can be.

Crypto taxes fall into two buckets: capital gains or ordinary income. Whether a gain is short-term (one year or less) or long-term (more than one year) depends on how long you held the lot you disposed of. The holding period starts the day after you acquire the crypto and ends on the day you dispose of it. The table below outlines various crypto tax activities.

A broker form may report proceeds without basis, particularly for noncovered assets. File from your full transaction history, not from the form alone.

The IRS taxes crypto as property, not as currency. A disposal (sale, swap, or spend) creates a capital gain or loss. Rewards are ordinary income at fair market value when you gain dominion and control of them, and that value becomes your basis.

The crypto tax rate then depends on the bucket and the holding period.

• Short-term gains (held for one year or less) are taxed at ordinary income rates: the 10%, 12%, 22%, 24%, 32%, 35%, and 37% brackets, the same rates for 2025 and 2026.

• Long-term capital gains on crypto (held for more than 1 year) are usually taxed at 0%, 15%, or 20%.

• Higher-income filers may also owe the 3.8% net investment income tax when modified adjusted gross income is above $200,000 (single or head of household), $250,000 (married filing jointly), or $125,000 (married filing separately).

Full brackets and income thresholds are in our crypto tax rates guide.

You have a capital gain when you dispose of crypto for more than your basis. You have a capital loss when you dispose of it for less than its cost.

How much tax on crypto gains you actually pay depends on holding period and the rest of your return. A weekend trade and a two-year hold of the same dollar gain do not get the same rate. If your losses exceed your gains for the year, you can deduct up to $3,000 of the excess against other income ($1,500 if married filing separately) and carry the rest forward.

Crypto income is ordinary income, measured at fair market value when you gain dominion and control of the crypto, meaning when you can sell, exchange, or otherwise dispose of it. Staking rewards, mining rewards, crypto paid for work, and many airdrops land here. Report it on Schedule 1, line 8v (or on Schedule C and Schedule SE if it's business income), not on Form 8949. That same dollar amount becomes your basis if you later sell, swap, or spend those tokens.

Covered brokers furnish Form 1099-DA for sales made in 2025, with statements to taxpayers in early 2026. For 2025 sales, brokers are not required to report basis.

That is why a 1099-DA may show a much larger number than your actual gain. Starting with 2026 sales, brokers must also report basis for covered assets: those you acquired on or after January 1, 2026, in a custodial account at that broker and still hold there. Anything bought earlier, or moved in from another wallet or exchange, is noncovered, so its basis can still be missing. Noncovered basis reporting is voluntary (Box 9 checked, Box 1g blank), and a blank basis box is not $0 basis, so supply it from your records. Your own wallet and exchange records remain important for filling those gaps.

Two numbers drive the math: the gain or loss on each disposal, and how long you held that lot.

Trading one coin for another, or using crypto to buy something, is still a disposal. You do not have to cash out to dollars first.

Crypto tax calculation example

Hypothetical numbers: you buy $20,000 of ETH and later swap it for $30,000 of BTC. That swap is a $10,000 short-term gain if you held the ETH for one year or less.

A few months later, you spend the BTC, now worth $60,000, on a car. Your basis in that BTC is $30,000 (the value when you received it). The spend is another $30,000 gain.

Total short-term gains in this chain: $40,000, before fees.

Crypto profit calculation example

You buy ETH for $10,000 and later sell it for $15,000 in cash. Your profit is $5,000 before fees. Transaction costs tied to the purchase can increase your basis, while qualifying costs tied to the sale can reduce the amount realized.

No. Buying crypto with US dollars and holding it is generally not taxable. You also do not realize a gain just because the price moved.

You can still have a reporting job. If you received staking rewards, an airdrop, or crypto as pay in the same year, those can be income even if you never sold. Use the IRS digital asset question tool before you check the box on Form 1040.

Capital gains events:

• Selling crypto for USD

• Swapping one coin for another

• Spending crypto on goods or services

Income events:

• Crypto as payment for work

• Staking rewards

• Mining rewards

• An airdrop, depending on the facts and when you can control the tokens

Pro tip: Moving crypto between your own wallets isn't taxable by itself, but the crypto you pay as a network fee is generally a small taxable disposal. That fee isn't added to basis or subtracted from proceeds. Keep records from both sides of the transfer to preserve your cost basis, and report taxable activity even without a Form 1099-DA.

DeFi does not have its own tax rate, and many DeFi transactions can still create taxable income or capital gains. However, the tax treatment of activities such as wrapping, liquidity provision, staking, and lending can depend on the transaction. Under Notice 2024-57, brokers don't have to file Form 1099-DA for wrapping and unwrapping, liquidity provider, staking, and lending transactions until further guidance, though rewards from them remain reportable. That relief covers broker reporting only; the activity can still be taxable. See our DeFi tax guide if your transaction history includes extensive protocol activity.

NFT mints and sales follow the same property rules. Long-term gains on a collectible can be taxed at up to 28%; under interim guidance (Notice 2023-27), the IRS looks through an NFT to the asset it represents to decide whether it's a collectible. Paying in ETH to mint can dispose of that ETH. Selling the NFT later is a second event. Creators may have ordinary income on primary sales and royalties. For more details, read our NFT tax guide.

Do the work in this order. The formula stays the same throughout.

• Gather transactions from every exchange, wallet, and on-chain app you used during the tax year.

• Separate taxable sales, swaps, and spending from transfers between wallets you own.

• Identify the units you disposed of and establish their cost basis, including acquisition fees.

• Calculate proceeds (what you received, minus selling fees) and subtract basis. Positive is a gain. Negative is a loss.

• Separate short-term gains and losses from long-term ones, then net them.

• Estimate federal tax using your filing status, taxable income, and rates. Account for crypto income separately, along with any state taxes and the net investment income tax.

Do it per lot, not as one annual blob. The gain on a single sale is not necessarily the amount you pay tax on: losses, other investments, income, and deductions all change the final bill.

Tracking crypto transactions

Export CSVs from every exchange. Pull wallet history. If you used DeFi, include swaps, bridges, LP activity, and mints.

Label transfers between accounts you control so they do not appear to be sales. Missing transfers are how basis disappears.

What records should crypto investors keep?

Keep enough records to rebuild each transaction if your 1099-DA doesn't report basis or doesn't reflect your full transaction history:

• Dates and times

• Asset, units, and wallet or account

• USD value at the time

• Fees

• Transaction hashes or trade IDs

• Which lots you identified, if you used specific identification

• Notes that a move was wallet-to-wallet

• Any 1099-DA, 1099-MISC, or other broker form you received

Finding your cost basis

Cost basis is what you paid for the lot, plus eligible buy-side fees. If you earned the crypto, basis is usually the fair market value you already reported as income. Since 2025, basis tracking generally works on a wallet-by-wallet or account-by-account basis under Treas. Reg. §1.1012-1(j), with Rev. Proc. 2024-28 governing the transition. If you hold the same asset in several wallets or accounts, you generally can't treat a lot held in one wallet as though it were sold from another.

The lot-selection approach determines which units are treated as sold when you hold more than one. To use specific identification, identify the units no later than the sale date and time, and keep records. If you don't, FIFO applies within that wallet or account, counting each unit from its original acquisition date even if you moved it in later.

For crypto held at a custodial broker, the permanent rule requires you to tell the broker which units you're selling. Notice 2026-20 extends temporary relief from that requirement through December 31, 2026: you can make the identification in your own books and records, including a standing order recorded before the sale, without communicating it to the broker. If you do, the units you identified control for tax purposes even when they differ from what the broker reports on Form 1099-DA. For self-custodied crypto, you already make the identification in your own records.

The table below outlines three common approaches; the FIFO vs. LIFO vs. HIFO guide has the full comparison.

Do not assume you can switch methods without the lots to back it up.

How accounting methods affect crypto gains (FIFO vs LIFO vs HIFO)

Say you hold 3 BTC in one wallet or account (hypothetical prices; all three lots are long-term):

• 1 BTC bought in 2018 for $8,000

• 1 BTC bought in 2021 for $50,000

• 1 BTC bought in 2022 for $19,000

You sell 1 BTC for $23,000.

• FIFO (default): 2018 lot. Gain = $15,000.

• Specific identification using LIFO: 2022 lot. Gain = $4,000.

• Specific identification using HIFO: 2021 lot. Loss = $27,000.

Same sale, three different answers. LIFO and HIFO produce those results only if you identify the units no later than the sale date and time. The $27,000 loss also isn't fully deductible in one year: after offsetting gains, you can deduct up to $3,000 against other income ($1,500 if married filing separately) and carry the rest forward.

Cost basis calculation example

You buy 1 ETH for $3,000 and pay a $100 fee. Basis is $3,100.

Later you sell it for $4,000 and pay a $40 selling fee. Proceeds are $3,960, and the gain is $860 ($3,960 − $3,100). If you held the ETH more than a year and the whole gain falls in the 15% long-term bracket, the federal tax on it is $129. If the gain were short-term and fell in the 22% bracket, it would be $189.20. Both figures assume no other gains or losses and exclude state taxes and the net investment income tax.

Worked example: one year, from transactions to tax forms

Hypothetical figures for a single filer, tax year 2025, on one exchange account and one self-custody wallet. No specific identification was made, so FIFO applies within each account.

The swap fee reduces the proceeds on the ETH you gave up; it isn't added to the basis of the BTC you received, which starts at $2,200. The network fee is a small disposal: its basis is $2,200 × (0.0001 ÷ 0.02) = $11.00. Totals: $1,455 long-term; ($346.50) short-term (−$347 + $0.50); net capital gain $1,108.50. A $150 staking reward in August is separate: it's ordinary income on Schedule 1, line 8v, with a $150 basis, and it never goes on Form 8949.

How is profit on cryptocurrency calculated?

Profit = proceeds − cost basis.

If you want a quick check before you rebuild a whole year, use the free crypto profit calculator.

Disposals and income go on different forms. A sale, swap, or spend is a capital transaction: it goes on Form 8949, and then Schedule D. Crypto you earn is ordinary income: it goes on Schedule 1, line 8v (or Schedule C and Schedule SE for a business), never on Form 8949.

For 2025 sales, most Form 1099-DA transactions belong in box H or K because the form doesn't report basis. Don't use box C or F for digital assets. For the line-by-line steps, see Form 8949 for crypto.

Each of these follows the same rules described above:

• Long-term gains (held more than one year) are taxed at lower rates than short-term gains.

• Harvest losses to offset gains. The wash sale rule (§1091) generally doesn't apply to crypto that isn't a security under current law, though the economic substance doctrine (§7701(o)) can still apply, with a 20% or 40% penalty under §6662.

• Add buy-side costs to basis, and subtract sale or swap costs from proceeds.

• Donate appreciated crypto to a qualified charity if you were going to give anyway.

• Use specific identification only if you identify the units no later than the sale date and time and keep records to support it.

• Estimate the gain or loss on a sale with the free crypto tax calculator.

The one-year holding period is what separates short-term from long-term rates. More tactics are in our how to reduce your crypto taxes article.