How to Report Crypto Gas Fees on Taxes in 2025

Wondering whether gas fees for Ethereum and other blockchains are tax-deductible?

If you used the Ethereum network to make transactions in the past year, you may have paid hundreds or even thousands of dollars in gas fees. While dealing with these fees may have felt frustrating at the time, there may be a silver lining: potential tax savings.  

In this article, we’ll discuss how reporting Ethereum gas fees can reduce your tax liability for the year. 

What are Ethereum/blockchain gas fees?  

Today, networks like Ethereum and Solana allow developers all across the world to build decentralized applications. Today, you can use these networks to trade NFTs or interact with decentralized finance (DeFi) protocols. 

In return for using the network, users must pay a ‘gas fee’ for individual transactions. These fees rise and fall based on how much demand there is for the network at any given time.

How are gas fees taxed?

The tax implications of gas fees can be difficult to understand for new investors. While spending crypto on gas fees is subject to tax, fees also come with tax benefits. 

Spending crypto on gas fees is taxable: When you pay a gas fee using cryptocurrency (like ETH), you're actually disposing of that crypto. The IRS treats this as a taxable event. For example, if you bought ETH at $2,000 and later use some of it to pay a $50 gas fee when ETH is worth $3,000, you’ll realize a capital gain on the portion you spent (which will be very small). 

Gas fees related to buying/selling crypto can reduce capital gains: Gas fees you pay when buying or selling crypto can be added to your cost basis or subtracted from your proceeds. When you buy crypto, the gas fee increases your cost basis (the amount you originally paid for your crypto), which reduces your taxable gain when you eventually sell. When you sell crypto, the gas fee reduces your proceeds (the amount you received for selling your crypto), which also reduces your taxable gain. 

While paying the gas fee triggers a small capital gain, that same fee can also reduce the capital gain on a crypto trade. In these situations, the tax benefits of fees typically outweigh the tax burden.

Is spending crypto on gas fees subject to capital gains tax? 

When you spend cryptocurrency on gas fees, this counts as a taxable disposal. You’ll have to recognize a capital gain/loss depending on how the price of the crypto you’ve disposed of has changed since you originally received it.

Are Ethereum gas fees tax deductible? 

In some situations, crypto gas fees can be used to reduce your capital gains and losses in relevant transactions. Let’s walk through a couple of examples: 

Buying assets

Here’s how fees related to buying cryptocurrency can be added to your cost basis.

Selling assets 

Here’s how fees related to selling assets can reduce the proceeds from your sale. 

Gas fees on wallet-to-wallet transfers, deposits, and failed transactions

The IRS has not provided clear guidance on how to treat transfers from one wallet to another, or on other transactions that require gas but aren’t directly related to an acquisition or disposal. There are different approaches available to taxpayers depending on their risk appetite.

Typically, the IRS allows expenses to be applied to the cost basis of property if the transaction meets one of the following two conditions: 

1. It is a necessary part of buying or selling the property. 
2. It increases the underlying value of the property. 

Since the IRS has labeled cryptocurrency as a type of property, it’s reasonable to assume that these same rules apply to crypto transactions. 

Wallet-to-wallet transfers, deposits, and failed transactions do not increase the underlying value of the tokens you hold. As a result, these fees cannot reduce your capital gains and losses.

Can Ethereum gas fees be used to offset income? 

Individuals cannot use gas fees to offset personal income. However, businesses can deduct any expenses related to operating their business. If the nature of your business involves transactions on the Ethereum blockchain, you will most likely be able to deduct gas fees on your business tax return.
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