How Is Crypto Taxed in the U.S.? Your Guide to This Tax Season

U.S. taxpayers must report crypto sales, conversions, payments, and income to the IRS and state tax authorities where applicable, each with distinct tax implications. This article explains when crypto becomes taxable and how activities affect your tax obligations. Let’s dive in.

Quick Note:
Coinbase doesn’t provide tax advice. This article reflects our interpretation of current IRS guidance, which may evolve. This isn’t personalized advice, but we prioritize accessible information for customers. Consult a tax professional regarding your circumstances.

Do I Owe Crypto Taxes?
In the U.S., crypto is treated as a digital asset, similar to stocks and bonds. Tax rates (capital gains or income) depend on acquisition method and holding period.

Key Tax Classifications:
Non-Taxable

• Buying crypto with cash & holding: Only taxable upon selling for gains.

• Donating to 501(c)(3) charities: May qualify for deductions.

• Receiving gifts: No tax until sold or staked.

• Gifting: $18K/year/recipient (2024) / $19K (2025); spousal limits higher. Excess requires gift tax filing (usually no immediate tax).

• Internal transfers: Between owned wallets isn’t taxable.

Capital Gains Taxable

• Selling for fiat: Taxable if profitable; losses deductible.

• Crypto-to-crypto swaps: Treated as sales (e.g., BTC to ETH).

• Spending crypto: Equivalent to selling (e.g., pizza purchase).

Income Taxable

• Crypto payroll: Taxed as ordinary income.

• Goods/services payments: Reportable as income.

• Mining: FMV at receipt date; business mining = self-employment income.

• Staking rewards: Taxable upon receipt. Note: staked ETH income becomes taxable when unlockable (per Coinbase).

• Other earnings (e.g., USDC rewards, cbETH holdings).

• Hard forks/airdrops: Follow latest IRS guidance.

• Promotional rewards (e.g., referral bonuses).

Hodler Benefit:
No tax while holding; triggered only upon disposal (sale/trade/spend).

Calculating Crypto Taxes
Income Calculation
Crypto income (mining, staking, etc.) taxed at applicable income tax rates (may affect bracket).

Capital Gains/Losses

• Cost basis: Purchase price or FMV at receipt (gifts use donor’s basis or FMV).

• Gains = Sale price – cost basis.

• Long-term (>1 year): 0%/15%/20% federal rates + possible 3.8% NIIT.

• Short-term: Ordinary income rates.

Loss Utilization
Offset capital gains dollar-for-dollar; $3K/year max against ordinary income (excess carries forward).

Coinbase Gain/Loss Report

Generate reports using HIFO/LIFO/FIFO methods (Coinbase-only activity). Verify accuracy; not official tax documentation.