Are crypto-to-crypto swaps taxable for US filers?

Yes. The IRS classifies cryptocurrency as property under Notice 2014-21, and a swap is a disposition of the first crypto at fair market value followed by acquisition of the second at the same value. Pre-2018 Section 1031 like-kind treatment was foreclosed by TCJA. Gain or loss recognized on the swap; basis of the newly-acquired crypto equals FMV at the time.

Are staking rewards taxed when received?

Yes. Under Rev. Rul. 2023-14, staking rewards are ordinary income at fair market value on the date the staker gains dominion and control over the reward, even if the reward is subject to a lock-up or slashing risk. The FMV recognized becomes the basis for the staked tokens. Self-employment tax may apply if the activity is a trade or business.

What is Form 1099-DA and when did it start?

Form 1099-DA is the broker-issued information return for crypto dispositions. Treasury final regulations TD 10000 require brokers to issue Form 1099-DA starting tax year 2025 (forms reach recipients in January 2026). Gross proceeds are reported in 2025; cost basis reporting becomes mandatory in 2026.

Do wash-sale rules apply to crypto?

IRC §1091 wash-sale rules historically have not applied to crypto because crypto is not a security under the statutory definition. Multiple legislative proposals would have extended wash-sale rules to crypto, but none have been enacted as of mid-2026. A filer who sells at a loss and repurchases the same crypto can generally claim the loss without disallowance.

How are NFTs taxed under current IRS guidance?

NFTs are digital assets under Notice 2014-21 property classification and subject to capital-gain rules on disposition. Notice 2023-34 introduced a look-through analysis: an NFT whose underlying associated asset is a collectible under IRC §408(m)(2) is taxed at the maximum 28 percent long-term rate. NFTs not tied to a collectible underlying use the standard 20 percent rate.

Crypto & digital assets

Q: Must the Form 1040 digital-asset question be answered if no crypto was sold?

Yes. The digital-asset question on Page 1 is answered Yes or No on every return regardless of taxable activity. No is correct when the filer only held crypto and did not receive crypto as a reward, payment, or compensation. Yes is required for any disposition or receipt event during the year.

A neutral, source-cited overview of US crypto taxation — IRS classification as property, taxable events, holding periods, mining and staking, NFTs, DeFi, and Form 1099-DA broker reporting starting tax year 2025.

How does the IRS classify cryptocurrency?

IRS Notice 2014-21 classifies virtual currency as property for US federal income tax purposes, not as currency [SC1]. The classification carries through every downstream calculation: gain or loss on disposition is computed the same way as on sale of stock or other capital property, holding-period rules determine long-term versus short-term character, and basis is tracked at the per-unit level. The Inflation Reduction Act of 2022 and the Infrastructure Investment and Jobs Act of 2021 directed Treasury to write broker-reporting regulations for digital assets; those final regulations (TD 10000) took effect for the 2025 tax year and introduced Form 1099-DA [SC2].

The property classification produces one consequence many filers find counterintuitive: paying for goods or services with crypto is a disposition and a taxable event. A filer paying for a USD 5 coffee with bitcoin acquired years earlier for USD 0.10 of basis realizes USD 4.90 of capital gain on the coffee purchase. The merchant receiving the bitcoin records ordinary income of USD 5 (or USD 5 of revenue with a corresponding cost basis if held as inventory).

The Form 1040 digital-asset question on Page 1 is answered Yes or No by every filer regardless of whether the filer had taxable activity. No is correct when the filer only held crypto and did not receive crypto as a reward, payment, or compensation. Yes is required for any disposition or receipt event. The IRS treats a wrong answer as a misrepresentation that could be referenced in subsequent compliance proceedings.

What counts as a taxable event with crypto?

Taxable dispositions of crypto under current IRS guidance [SC1]:

Sale for fiat currency: USD-denominated sale is a taxable disposition. Gain or loss equals proceeds minus adjusted basis.
Exchange for another cryptocurrency: A swap of Bitcoin for Ethereum is treated as a sale of the Bitcoin (gain or loss recognized) followed by a purchase of the Ethereum at the same fair market value (which becomes new basis). Pre-2018 Section 1031 like-kind treatment was foreclosed by TCJA narrowing §1031 to real property only.
Payment for goods or services: Using crypto to pay a vendor is a disposition.
Receipt of crypto as compensation: Wages or self-employment income paid in crypto are ordinary income at FMV on receipt; FMV becomes basis.
Mining rewards: Ordinary income at FMV on receipt. SE tax may apply if activity is a trade or business under IRC §183.
Staking rewards: Under Rev. Rul. 2023-14, ordinary income at FMV on dominion-and-control date, even if subject to lock-up or slashing.
Hard-fork airdrops: Under Rev. Rul. 2019-24, ordinary income at FMV on dominion-and-control date [SC3]. Promotional drops also generally ordinary income on receipt.
DeFi liquidity provision, yield farming: Generally taxable events; IRS guidance is sparse.

Non-taxable events: purchase of crypto with fiat (no gain until disposition), wallet-to-wallet transfers between the same beneficial owner, and gifts below the USD 19,000 annual gift-tax exclusion (recipient takes donor's basis under IRC §1015).

How are holding periods computed?

Holding period for crypto follows IRC §1223: begins day after acquisition, ends on disposition. Crypto held one year or less generates short-term gain/loss taxed at ordinary marginal rates (10-37 percent for 2025). Crypto held more than one year generates long-term gain/loss eligible for the 0/15/20 percent preferential rates that apply to long-term capital gains generally (see the Capital gains tax in the United States crossover for the bracket detail).

Lot-selection method determines which specific units are deemed sold when only part of a position is disposed of. The IRS permits two methods: specific identification (filer designates lots; typically the highest-basis lots first — HIFO) and FIFO (default when specific ID is not used). Treasury final regulations TD 10000 require designation at or before time of sale to substantiate specific ID. Broker reporting on Form 1099-DA from 2025 forward defaults to FIFO if no designation is on file [SC2].

The wash-sale rules of IRC §1091 historically do not apply to crypto because crypto is not a security under the statutory definition. Legislative proposals to extend wash-sale rules to crypto have not been enacted as of mid-2026. A filer who sells at a loss and immediately repurchases the same crypto generally claims the loss — a posture different from equities.

How are NFTs and DeFi taxed?

NFTs are digital assets under Notice 2014-21 property classification and subject to capital-gain rules on disposition. Notice 2023-34 introduced a look-through analysis: an NFT is treated as a collectible if its underlying associated asset is a collectible under IRC §408(m)(2), subjecting long-term gain to the maximum 28 percent collectibles rate rather than the standard 20 percent. NFT creators recognize ordinary income on primary sales (or self-employment income); royalties on secondary-market sales are ordinary income at FMV on receipt.

DeFi taxation operates under general crypto principles because specific guidance is sparse. Practitioner consensus treats lending to a protocol (deposit minting interest-bearing token may be taxable exchange; accrued interest is ordinary income), liquidity pool provision (deposit and withdrawal as paired dispositions with impermanent loss realized at removal), yield farming (each new reward token is ordinary income at FMV on receipt), governance token receipt (ordinary income on receipt with basis equal to FMV recognized), and DEX swaps (taxable disposition of input token and acquisition of output token at FMV).

Gas fees paid in crypto are potential dispositions of the gas-paying crypto. Capitalization versus deduction depends on the underlying transaction. The DeFi tax-software tooling category (CoinTracking, Koinly, TokenTax, ZenLedger) exists because manual reconciliation across multiple chains, wallets, and protocols is impractical at scale.

What is Form 1099-DA and when does it apply?

Form 1099-DA (Digital Asset Proceeds From Broker Transactions) is the broker-issued information return for crypto dispositions, modeled on Form 1099-B for traditional securities [SC2]. Treasury issued final regulations TD 10000 in mid-2024 finalizing the broker-reporting framework. Tax year 2025: brokers issue Form 1099-DA for gross proceeds on dispositions (first forms reach recipients in January 2026). Cost basis reporting is optional in 2025 and mandatory from 2026. The DeFi broker definition was finalized then withdrawn in early 2025 under the regulatory pause; legislative and regulatory status remains in flux as of mid-2026.

Filers receive a Form 1099-DA from each broker (centralized exchange, custodial wallet provider, NFT marketplace) on which they had dispositions during the year. Discrepancies between filer's records and broker's report (typical when assets moved between wallets) are reconciled on Form 8949 with adjustment codes. Digital-asset dispositions report on Form 8949 (short-term Part I, long-term Part II) with totals rolling to Schedule D. Crypto income from mining, staking, airdrops, or compensation flows through different schedules: Schedule C for self-employed mining/staking businesses; Schedule 1 (Additional Income) for hobby-level activity; Form W-2 wages box 1 for crypto received as employer compensation.

For the full federal treatment of US crypto taxation including FBAR/Form 8938 reporting for foreign-held crypto and PFIC interactions with crypto-asset foreign funds, see the Crypto taxation in the United States crossover. The Capital gains tax crossover covers the long-term rate brackets that apply to crypto held more than one year. The Self-employed tax crossover covers Schedule C mechanics for self-employed crypto miners and stakers.

Practitioners managing 1099-NEC issuance for crypto-paid contractors use Tax1099 for e-filing, and filers managing fiat-to-crypto conversions through multi-currency accounts often use WorldFirst for the fiat side. To find a credentialed practitioner with crypto-tax experience, browse the US tax-pros directory.