How Cryptocurrency Is Taxed in 2026

The IRS treats cryptocurrency as property, not currency. Every time you sell, trade, or otherwise dispose of a digital asset, it triggers a taxable event. Your gain or loss equals the difference between what you received (the sale price) and your cost basis (what you originally paid). Gains are classified the same way as stocks: short-term if you held the asset one year or less (taxed at ordinary income rates up to 37%), or long-term if held longer than one year (taxed at the preferential 0%, 15%, or 20% capital gains rates).

You report every individual transaction on Form 8949, listing the asset name, dates acquired and sold, proceeds, cost basis, and gain or loss. The totals then flow to Schedule D of your Form 1040. Crypto received as income from mining, staking, or airdrops is taxed as ordinary income at its fair market value on the date you received it, and reported on Schedule 1.

Key point: Unlike stocks and securities, cryptocurrency is not currently subject to the wash sale rule. You can sell crypto at a loss and immediately repurchase the same asset to harvest the tax deduction. However, proposed legislation could extend wash sale rules to digital assets in the future, so stay informed about changes from the IRS and Congress.