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

Summary: Report crypto taxes in 5 steps 

As of 2025, cryptocurrency is subject to capital gains tax and income tax in the US.

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 2024, 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, disposed of a crypto-asset or received cryptocurrency as a gift, you should answer ‘Yes’ to this question.

The IRS asks this question for information-gathering purposes. Answering ‘Yes’ will not increase your tax liability or your risk of an audit. However, intentionally lying on this question is considered tax fraud.

What forms should I receive from my exchanges? 

Starting in 2026, cryptocurrency exchanges will issue Form 1099-DA, reporting your capital gains and losses from cryptocurrency. An identical copy is sent to the IRS. 

It’s possible that these forms may be inaccurate if you transferred crypto to/from your exchange. In this case, the capital gains calculations may be overestimated. 

If you find yourself in this situation, you should provide the IRS with a record of your cryptocurrency transactions across different exchanges to avoid potentially overpaying your taxes.

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:

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.

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 less than 12 months 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? 

Some centralized exchanges issue 1099 forms to report capital gains and losses. Depending on whether your exchange(s) issue Form 1099-B (or a substitute statement),you should check one of the following boxes.

A. Short-term transactions reported on Form(s) 1099-B, showing basis was reported to the IRS

B. Short-term transactions reported on Form(s) 1099-B, showing basis was not reported to the IRS

C. Short-term transactions not reported to you on Form 1099-B

Starting in 2026, cryptocurrency exchanges will be required to issue Form 1099-DA. It’s likely that this will be considered a substitute statement for Form 1099-B. 

If you transferred crypto into or out of your exchange, it’s possible that your 1099 form does not have accurate information on your cost basis. In this case, you should check box B.

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, forks, or other crypto wages and hobby income, this is generally reported on Schedule 1 as other income.

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!
‍

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 less than 12 months of holding. Depending on your income bracket, this can vary between 10-37%. 

Tax Rate	Single	Married Filing Jointly	Married Filing Separately	Head of Household
10%	$0 to $11,600	$0 to $23,200	$0 to $11,600	$0 to $16,550
12%	$11,601 to $47,150	$23,201 to $94,300	$11,601 to $47,150	$16,551 to $63,100
22%	$47,151 to $100,525	$94,301 to $201,050	$47,151 to $100,525	$63,101 to $100,500
24%	$100,526 to $191,950	$201,051 to $383,900	$100,526 to $191,950	$100,501 to $191,950
32%	$191,951 to $243,725	$383,901 to $487,450	$191,951 to $243,725	$191,951 to $243,700
35%	$243,726 to $609,350	$487,451 to $731,200	$243,726 to $365,600	$243,701 to $609,350
37%	$609,351 or more	$731,201 or more	$365,601 or more	$609,351 or more

‍Long-term capital gains: You’ll pay long-term capital gains tax when you dispose of cryptocurrency after 12 months or more of holding. Depending on your income bracket, the tax rate on your long-term disposals will range from 0-20%.

Tax Rate	Single	Married Filing Jointly	Married Filing Separately	Head of Household
0%	Up to $47,025	Up to $94,050	Up to $47,025	Up to $63,000
15%	$47,026 – $518,900	$94,051 – $583,750	$47,026 – $291,850	$63,001 – $551,350
20%	Over $518,900	Over $583,750	Over $291,850	Over $551,350

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. 

Many exchanges issue Form 1099-MISC to customers who have $600 or more of income. 

Starting in the 2026, all exchanges operating in the United States will be required to issue Form 1099-DA to report capital gains and losses 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? 

Typically, exchanges only issue Form 1099-MISC for cryptocurrency income if you’ve earned at least $600 of rewards. 

However, you are required to report all of your taxable income from cryptocurrency on your tax return, regardless of the total amount. Not reporting your income is considered tax fraud.

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.

In the past, the agency has even worked 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 upload your reports directly into TurboTax or TaxAct to include with the rest of your tax return or send them directly to your tax professional.

Get started with a free CoinLedger account today.