I Paid For Something With Crypto - How Do I Do My Taxes?

According to the IRS's official digital asset guidance, cryptocurrency is treated as property for tax purposes. That means paying for a good or service with crypto works the same as selling property — you realize capital gains or capital losses on the transaction, and those need to be reported on your taxes.

I bought something with Bitcoin — how do I report this on my taxes?

Let's walk through an example to show exactly how this works.

Example: Buying a TV with Bitcoin

Buying the TV is a disposal of a crypto asset. You realize the gain at the moment of purchase — not when you eventually sell the TV.

What if your bitcoin had fallen in value instead? Say that same 0.05 BTC was worth $400 at the time of purchase rather than $600. You would have a $100 capital loss ($400 FMV − $500 cost basis). You still report this on Form 8949 — and capital losses can offset your other capital gains and up to $3,000 of ordinary income per year.

Short-term vs. long-term gains on crypto payments

How long you held the crypto before spending it determines which tax rate applies:

Short-term (held 1 year or less): taxed at ordinary income rates, 10%–37% depending on your total income.

Long-term (held more than 1 year): taxed at preferential rates — 0%, 15%, or 20%.

In the TV example, the bitcoin was held for two months, so the $100 gain is short-term and taxed at ordinary income rates. For a full breakdown of rates, see our guide to crypto capital gains tax rates.

You report the gain or loss on Form 8949. For the 2025 tax year, your federal return — including Form 8949 — is due by April 15, 2026. Read our guide on how to report cryptocurrency on taxes for a detailed walkthrough of how to complete Form 8949.

What the 1099-DA means for your crypto payments

Starting with transactions on or after January 1, 2025, exchanges and payment processors classified as brokers are required to file Form 1099-DA with the IRS reporting your gross proceeds.

That means if you spend crypto through an exchange-based wallet or payment app, the IRS will receive a report of those proceeds — similar to how stock brokerages report sales on Form 1099-B.

A few things to know about how this works in practice:

2025 forms report gross proceeds only. Cost basis reporting starts with 2026 transactions, so the IRS won't have your cost basis on file until early 2027. In the meantime, the burden of proof for your cost basis stays with you.

You must report all crypto payments, with or without a 1099-DA. The form doesn't create your reporting obligation — it just means the IRS now has the same information your exchange does.

Remember, accurate cost basis records matter more than ever. The IRS can cross-reference your Form 8949 against what your broker reported on Form 1099-DA. Discrepancies can trigger follow-up.

The challenge with cryptocurrency payments

Every crypto payment requires you to know the USD value of the crypto at the exact moment of the transaction, plus your original cost basis for that specific amount. If you've made dozens of purchases over the years across multiple exchanges, tracking this manually is a real challenge.

Crypto tax software is built to handle exactly this. It automatically imports your transactions, retrieves historical USD prices, and calculates your gains and losses, so you can generate crypto tax reports without building a spreadsheet.

How crypto tax software can help

Looking to file your crypto taxes? Try CoinLedger, the crypto tax software trusted by more than 700,000 investors around the world.

All of your cryptocurrency payments will be automatically imported and your gains and losses calculated. You can generate crypto tax reports in just minutes — ready to file or hand to your accountant.

Get started with a free CoinLedger account today!