How to Cash Out Crypto Without Paying Taxes

Cashing out crypto is a taxable sale, but you can legally pay less tax, or even nothing at all. In 2026, a single filer pays 0% federal tax on long-term capital gains as long as their taxable income stays at or below $49,450 ($98,900 for married couples filing jointly).

Pro tip: Do I need to pay taxes on crypto if I don’t cash out?

There is no tax for simply holding cryptocurrency. You won’t be required to pay tax unless you dispose of your crypto or earn interest income on your cryptocurrency. 

What happens if I don’t report my crypto to the IRS?

Willfully hiding your cryptocurrency transactions from the IRS can be prosecuted as tax evasion, a felony. The maximum penalty for tax evasion is 5 years in prison and a fine of up to $250,000 for individuals, plus the costs of prosecution. Honest mistakes aren’t treated as evasion, but they can still bring civil penalties, such as a 20% accuracy-related penalty on the underpaid tax, plus interest. 

Though cryptocurrency transactions are pseudo-anonymous, it’s important to remember that the IRS has tools to match your wallet to your identity. Starting with 2025 sales, US exchanges like Coinbase report your crypto sales to the IRS on Form 1099-DA, along with your name and taxpayer ID. 

In addition, it’s important to remember that transactions on blockchains like Ethereum and Bitcoin are publicly visible and permanent. The IRS works with contractors like Chainalysis to analyze blockchain transactions and identify ‘anonymous’ wallets. 

How is cryptocurrency taxed in the US?

In the United States and most other countries, cryptocurrency is subject to capital gains and ordinary income tax. 

Cashing out cryptocurrency to fiat currency is considered a disposal subject to capital gains tax. 

For more information, check out our ultimate guide to how cryptocurrency is taxed in the United States. 

How much taxes do you pay when you cash out crypto?

How much tax you pay on your cryptocurrency disposals depends on multiple factors, such as your total income for the year and how long you held your cryptocurrency. 

Long-term capital gains tax

If you dispose of your cryptocurrency after longer than 12 months of holding, you’ll pay long-term capital gains tax ranging from 0-20%. 

Long-term capital gains tax rates, 2026 tax year (returns filed in 2027):

Short-term capital gains tax

If you dispose of your cryptocurrency after holding it for 12 months or less, your profits will be considered ordinary income and taxed between 10-37%. 

Ordinary income tax rates, 2026 tax year (returns filed in 2027):

For more information, check out our guide to crypto tax rates. 

How to legally cash out your cryptocurrency without paying taxes

Converting your cryptocurrency into fiat currency is subject to capital gains tax. However, there are strategies that help you legally reduce your tax bill on your cryptocurrency profits.

Take your profits in low-income years

The lower your income for the year, the lower the tax rate you’ll pay on your cryptocurrency income. 

To minimize your tax bill, consider cashing out your crypto in years when your income is low. Many investors choose to realize profits in years where they are between jobs or they are studying full-time.

If you’ve held your crypto for more than a year, a low-income year can bring your tax rate on the gain down to 0%. In 2026, long-term capital gains are taxed at 0% as long as your taxable income (your income after deductions, including the gain itself) stays at or below these limits:

• $49,450 if you’re single or married filing separately
• $98,900 if you’re married filing jointly
• $66,200 if you’re a head of household

Harvest losses

Selling your cryptocurrency at a loss can help offset potential gains and reduce your tax bill! 

When you harvest losses, you can offset your gains from cryptocurrency, stocks, and other assets and up to $3,000 of income. Any net losses above this amount can be carried forward into future tax years. 

It’s important to note that the wash sale rule doesn’t apply to crypto under current law. A House bill, H.R. 10357, would apply it to crypto sold after September 14, 2026. The House Ways and Means Committee advanced the bill 38-5 on September 16, 2026, but it hasn’t had a floor vote, and it may never become law.

Crypto IRAs

Crypto IRAs (individual retirement accounts) can help you grow wealth on a tax-free or tax–deferred basis. While most retirement plan providers don’t allow you to invest in cryptocurrency IRAs directly, you can use a self-directed IRA provider like iTrustCapital or one of the other providers in our crypto IRA ranking. 

With a Roth IRA, qualified withdrawals are free of federal income tax, including any gains on your crypto. For 2026, you can contribute up to $7,500 across your IRAs, plus a $1,100 catch-up contribution if you’re 50 or older.

Remember, crypto IRAs are recommended for those who are looking to hold their cryptocurrency for long periods of time. Withdrawals before age 59½ generally face a 10% additional tax unless an exception applies.

Take out a cryptocurrency loan

Instead of cashing out your cryptocurrency, consider taking out a cryptocurrency loan. 

In general, loans are considered tax-free. That means that if you’re looking for access to fiat currency, taking out a loan may be a great alternative to selling your cryptocurrency.

Keep in mind that taking out a loan isn’t a sale of your crypto, but if your lender liquidates your collateral (for example, after a margin call), that counts as a taxable sale.

Donate crypto to charity

Donating crypto to a qualified charity isn’t a taxable sale, so you don’t pay capital gains tax on its growth. If you’ve held the crypto for more than a year and you itemize your deductions, you can generally deduct its fair market value on the day you donate it.

If you claim a deduction of more than $5,000 for donated crypto, you’ll need a qualified appraisal and Form 8283. For more information, check out our guide to crypto donations and taxes.

Gift crypto to family

In 2026, you can give up to $19,000 of crypto per person without filing a gift tax return. Giving crypto as a gift isn’t a sale, so you don’t owe capital gains tax when you give it.

However, the person who receives your crypto takes on your cost basis, so the gain moves to them rather than disappearing. That can still save tax if they’re in the 0% long-term bracket when they sell. Keep in mind that if you give crypto to a child, the kiddie tax can tax their investment income above a set amount at their parent’s tax rate. For more information, check out our guide to how crypto gifts are taxed.

Move to a low-tax state or country

While it may seem like an extreme step to take, some investors do choose to relocate to low-tax states. Currently, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming have no income taxes. 

Washington doesn’t currently tax wages, but it does tax long-term capital gains, including gains on crypto held for more than a year. The rate is 7% on gains above an annual deduction (the deduction was $278,000 for 2025, and the 2026 amount hasn’t been published yet), and 9.9% on taxable gains over $1 million. Washington has also passed a new 9.9% income tax on adjusted gross income over $1 million for individuals and married couples filing jointly, scheduled to start January 1, 2028. Voters will decide on November 3, 2026 whether to repeal it (Initiative 645).

Some investors even choose to relocate to countries where cryptocurrency isn’t taxed. For example, the United Arab Emirates doesn’t levy income tax on individuals. However, US citizens are taxed on their worldwide income wherever they live, so moving abroad doesn’t end US tax on your crypto gains. 

For more tips, check out our guide on how to legally avoid cryptocurrency taxes. 

How do I cash out Bitcoin and other cryptocurrencies?

Centralized exchanges

Centralized exchanges like Coinbase, Gemini, and Kraken are the easiest way to cash out cryptocurrency. These exchanges allow you to sell your crypto for fiat, then transfer the funds to your bank account! 

Peer-to-peer trades

Peer-to-peer (P2P) trading platforms allow users to sell cryptocurrencies directly to other individuals. Sellers can typically choose from multiple payment methods, such as a bank wire transfer. 

Cash out at a Bitcoin ATM

Some Bitcoin ATMs allow you to sell your Bitcoin for cash, but many machines only let you buy crypto. Before you can trade, the ATM operator verifies your identity, which can range from a phone number to a scan of a government-issued ID. 

Bitcoin ATMs typically charge high fees, especially compared to traditional exchanges. 

Trade crypto for another

Most centralized exchanges allow you to trade one cryptocurrency for another. Some exchanges may require you to convert to a stablecoin like USDC or USDT before purchasing another cryptocurrency. Swapping crypto for a stablecoin like USDC or USDT, or for any other crypto, is taxed the same way as selling it for dollars, so it doesn’t let you cash out tax-free. 

How CoinLedger can help

Looking for an easy way to save money on your cryptocurrency taxes? CoinLedger can help. The platform is built to minimize the amount of taxes you owe from crypto.

Today, more than 700,000 investors use CoinLedger to find their largest tax-saving opportunities and generate a complete tax report in minutes.

Get started with a free CoinLedger account.