How to Report Crypto on Your Taxes (Step-By-Step)

Summary: Report crypto taxes in 5 steps 

To report crypto on your taxes, answer the digital asset question on Form 1040 (‘Yes’ if you sold, traded, spent or earned crypto), list each sale or trade on Form 8949, carry the totals to Schedule D, and report crypto income on Schedule 1, or on Schedule C if it’s business income. 

Remember, you are required to report all of your taxable income from crypto on your tax return! Failure to report can result in penalties, fines, and even a potential audit. 

Here are the 5 steps you need to take to report crypto on your taxes. We'll break these down in more detail below!

If you’re looking for an easy way to simplify the tax reporting process, crypto tax software like CoinLedger can help! Just connect your wallets and exchanges and let the platform generate complete tax forms in just minutes.

Before we jump into the details of tax reporting, let’s answer some common questions about crypto tax.

How do I answer the crypto question on Form 1040? 

The cryptocurrency question on Form 1040 is one of the first things that most taxpayers will see on their return:

“At any time during 2026, did you: (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”

If you earned cryptocurrency income or sold, traded or spent crypto, you should answer ‘Yes’ to this question. You can answer ‘No’ if you only held crypto, bought it with dollars, or moved it between your own wallets. The exception is paying a transfer fee in crypto, which the IRS says makes the answer ‘Yes’. Simply receiving crypto as a gift doesn’t require a ‘Yes’ on its own, though giving cryptocurrency as a gift does.

What forms should I receive from my exchanges? 

Starting with sales on or after January 1, 2025, crypto brokers such as centralized exchanges are required to issue Form 1099-DA, reporting the gross proceeds from your crypto sales. A copy of the form is sent to the IRS. 

Starting with 2026 sales, brokers must also report your cost basis, but only for covered assets. A covered asset is crypto you bought on or after January 1, 2026 and kept with the same broker until you sold it. If you bought your crypto before 2026 or transferred crypto in from another wallet or exchange, it’s noncovered, and its cost basis may be left blank. In cases like these, your capital gains may be overstated.

If you find yourself in this situation, don’t panic. You are allowed to provide your own cost basis records, provided that you have documentation (more on this later). 

How to report your crypto taxes in 5 steps 

Step 1. Calculate your crypto gains and losses

Summary: Get a complete record of your transaction history, and then calculate your gains and losses from each disposal.

Every time you dispose of cryptocurrency, you’ll recognize capital gains or capital losses that need to be reported on your taxes. Examples of cryptocurrency disposals include the following: 

• Selling your cryptocurrency for fiat 
• Trading your cryptocurrency for another cryptocurrency 
• Buying goods and services with cryptocurrency 

You’ll need to look at all of your cryptocurrency disposals during the tax year and calculate your gains and losses from each one.

While you can use information from Form 1099-DA to report your taxes, it’s important to remember that these forms can be inaccurate if you transfer your crypto between wallets you own. 

How to calculate capital gains and losses

Here’s a formula you can use to calculate your gains and losses from a disposal:

Capital Gain/Capital Loss = Proceeds - Cost Basis 

What are proceeds?: Your proceeds are what you received for disposing of your cryptocurrency. Typically, this is the fair market value of your crypto at the time of disposal, minus the cost of any fees related to your disposal. 

What is cost basis?: Your cost basis is your cost for acquiring your cryptocurrency. This is typically the fair market value of your crypto at the time of receipt, plus the cost of any fees related to the acquisition.

How do I report proceeds?: You can use information from Form 1099-DA to report your proceeds from disposals. It’s recommended that you match the numbers on Form 1099-DA on your tax return, as this is what the IRS has on file. 

How do I report cost basis to the IRS?: Cost basis information on Form 1099-DA can be inaccurate. Remember, you are allowed to report your own cost basis, as long as you have documentation. It’s recommended that you use crypto tax software to get an accurate record of your cost basis across wallets and exchanges, then report this on your tax return.

Once you’ve finished your calculations, you can report your gains and losses on Form 8949.

Example: Calculating capital gains/losses

To better understand how to calculate your capital gains and losses, let’s take a look at an example.

Unfortunately, these calculations aren’t always so simple. An active cryptocurrency trader may have thousands of buys and sells in a year, making it difficult to calculate their net gain/loss.

Cryptocurrency tax software like CoinLedger can make it easy to track your cryptocurrencies. Simply connect your exchanges, import your historical transactions, and let the software crunch your gains and losses for all of your transactions in seconds.

Not comfortable reporting your gains and losses on your own? Try CoinLedger Done For You. A CoinLedger Expert will work with you one-on-one to answer your questions, import your data, and generate complete tax forms!

Step 2. Complete IRS Form 8949

Summary: Report all your disposals of cryptocurrency, short-term and long-term, on Form 8949. 

If you dispose of cryptocurrency during the tax year, you’ll need to fill out IRS Form 8949. The form is used to report the sales and disposals of capital assets, including stocks, bonds, and cryptocurrencies.

Let’s break down how you can fill out Form 8949. 

Short-term vs. long-term disposals 

Form 8949 consists of two parts: Part I for Short-term and Part II for Long-term.

If you disposed of your cryptocurrency after 12 months or less of holding, your gain or loss should be reported on Part I. If you dispose of your crypto after more than 12 months of holding, your gain or loss should be reported on Part II.

Was your transaction reported on Form 1099? 

It’s likely that if you sold/disposed of cryptocurrency on a centralized exchange in 2026, you’ll receive Form 1099-DA. In this case, you’ll need to check the matching box at the top of Form 8949.

For short-term sales in Part I, check box G if your Form 1099-DA shows your cost basis was reported to the IRS, or box H if it wasn’t. If you had a short-term disposal that wasn’t reported on Form 1099-DA, check box I. Long-term sales in Part II use boxes J, K and L for the same three cases. In most cases, you’ll use box G or J for covered assets, since brokers must report the cost basis of covered assets to the IRS.

How to report your gains and losses on Form 8949 

Next, you’ll need to fill in the following information for each of your gains and losses. 

• A description of the crypto-asset you sold (a)
• The date you originally acquired your crypto-asset (b)
• The date you sold or disposed of the crypto-asset (c)
• Proceeds from the sale (fair market value) (d)
• Your cost basis for purchasing the crypto-asset (fair market value) (e)
• Your gain or loss (h)

Want a demonstration of how to fill out Form 8949? Check out the video below. 

Do I need to report my capital losses? 

In addition to your capital gains, you should report your short-term and long-term cryptocurrency losses on Form 8949. 

Remember, capital losses come with tax benefits! Capital losses can offset your capital gains and up to $3,000 of personal income. 

For more on this subject, check out our complete guide to tax-loss harvesting.  

Step 3. Include totals from Form 8949 on Schedule D

Summary: Take your total gain/loss on Form 8949 and report it on Schedule D.

Once your Form 8949 is filled out, take your total net gain or net loss and include it on Schedule D.

Schedule D, attached to Form 1040, is used to report gains and losses from all sources. In addition to your short-term and long-term gains from cryptocurrency, other line items reported on Schedule D include Schedule K-1s via businesses, estates, and trusts.

Step 4. Include other crypto income 

Summary: Sum up your earned cryptocurrency income and report it on Schedule 1 or Schedule C.

If you earned other crypto through mining, staking, interest, referral rewards, or as compensation for your labor, you will recognize ordinary income subject to income tax. This is taxed the same as income you may receive from your job!

To accurately report your income, you should account for all the cryptocurrency you earned during the year.  You’ll recognize income based on the USD value of your crypto at the time of receipt.

What form should I use to report my crypto income? 

Schedule 1 - If you earned crypto from airdrops, hard forks, staking or mining that isn’t part of a business, report it on Schedule 1, line 8v. Crypto paid to you as wages by an employer is reported on your Form W-2 and Form 1040, line 1a instead.

Schedule C - If you earn crypto through a business, such as a mining operation, or as an independent contractor, report it on Schedule C.

Step 5. Complete the rest of your tax return

Now that you have reported your capital gains and income, you should be finished reporting all the crypto-related transactions on your tax return. Once you’ve filled out the rest of your tax forms, you should be ready to submit your tax return to the IRS! For the 2026 tax year, your Form 1040 is due April 15, 2027 (October 15, 2027 if you file for an extension).

How much tax do I pay on cryptocurrency? 

The tax rate you pay on cryptocurrency varies depending on multiple factors, including your holding period and your tax bracket.

Short-term capital gains/income: You’ll pay income tax when you earn cryptocurrency income or dispose of crypto after 12 months or less of holding. Depending on your income bracket, this can vary between 10-37%. Here are the income tax brackets for the 2026 tax year (returns filed in 2027). 

Long-term capital gains: You’ll pay long-term capital gains tax when you dispose of cryptocurrency after more than 12 months of holding. Depending on your income bracket, the tax rate on your long-term disposals will range from 0-20%. Here are the long-term capital gains brackets for the 2026 tax year (returns filed in 2027).

How are my crypto transactions taxed? 

Let’s quickly walk through how different types of crypto transactions are taxed. 

• Selling crypto: When you sell crypto, you’ll incur a capital gain or loss depending on how the price of your crypto has changed since you originally received it. 
• Crypto-to-crypto trades: When you trade crypto for another cryptocurrency, you’ll incur a capital gain or loss depending on how the price of your crypto has changed since you originally received it. 
• Moving crypto between wallets: Moving crypto between wallets you own is non-taxable! Because the ownership of your crypto has not changed, there is no taxable event. 
• Staking/mining: When you earn cryptocurrency through staking and mining, you’ll recognize income based on the fair market value of your rewards at the time of receipt. When you dispose of your staking/mining rewards, you’ll incur a capital gain or loss depending on how the price of your crypto changed since you originally received it. 
• Airdrops:  When you earn cryptocurrency through airdrops, you’ll recognize income based on the fair market value of your rewards at the time of receipt. When you dispose of your airdrop rewards, you’ll incur a capital gain or loss depending on how the price of your crypto changed since you originally received it.

Do exchanges like Coinbase report to the IRS? 

Exchanges like Coinbase do report to the IRS through 1099 forms. 

Form 1099-MISC: Exchanges generally issue Form 1099-MISC when they pay you $2,000 or more of rewards or other income in a year. The threshold was $600 for payments made before 2026. This may include staking rewards. 

Form 1099-DA: Starting with 2025 sales, exchanges operating in the United States are required to issue Form 1099-DA to report your crypto sales to the IRS. This means that the IRS will have even more information at its disposal to crack down on crypto tax fraud.

Do I need to report cryptocurrency under $600? 

Yes, you need to report all of it. You are required to report all of your taxable income from cryptocurrency on your tax return, regardless of the total amount. Intentionally not reporting your income can be treated as tax fraud.

The $600 figure comes from Form 1099-MISC. Exchanges used to issue the form only if you earned at least $600 of rewards in a year. For payments made after December 31, 2025, the threshold is $2,000.

Form 1099-DA has no minimum for most crypto sales. However, under the de minimis rules, brokers don’t have to report qualifying stablecoin sales of up to $10,000 a year, specified NFT sales of up to $600 a year, or sales made through a payment processor of up to $600 a year. You still need to report these sales on your tax return.

Do I need to report crypto on my tax return? 

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

While crypto transactions are pseudo-anonymous, it’s important to remember that the IRS can track your transactions through exchange-provided 1099 forms.  If you transfer crypto between a centralized exchange with Know Your Customer (KYC) verification and an ‘anonymous’ wallet, it’s likely the IRS can trace your identity.

The agency even works with contractors like Chainalysis to analyze publicly-available transactions on blockchains like Bitcoin and Ethereum.

Remember, there’s no limit to when the IRS can open up an audit on a case that involves tax fraud. The best way to avoid future issues with tax authorities is to accurately report your taxes. 

Get started with cryptocurrency tax software

There’s no need to fill out your tax forms by hand. Today, more than 700,000 investors use CoinLedger to generate complete tax forms in minutes. 

CoinLedger allows you to import transactions from hundreds of blockchains and exchanges in just a few clicks. 

You can then import your reports into TurboTax, use them to complete TaxAct, H&R Block or another tax platform, or send them to your tax professional.

Get started with a free CoinLedger account today.