Is Crypto Taxable in the USA? What the IRS Requires in 2026

Is crypto taxable in the USA? Yes. After all, like Benjamin Franklin said: “In this world nothing can be said to be certain, except death and taxes.”

But exactly when does crypto become taxable? Is it when you buy it? Or when you trade? Or when you sell? The answer is important because tax evasion comes with penalties in the US. 

On the other hand, you absolutely do not want to pay more than you have to.

This article keeps you on the right side of the law while protecting your crypto from the taxman. We’ll look at the IRS stance on crypto tax, taxable events, and how to report taxes. We’ll also throw in some tips too.

But note that this article is merely informational and applies generally to both investors and traders. It would be great if you talk to a tax expert in your area about IRS crypto tax requirements so you get answers for your specific context.

Table of Contents

• How the IRS Treats Cryptocurrency for Tax Purposes
• New IRS Reporting Rules Starting in 2026
• How to Report Crypto Taxes on Your U.S. Tax Return
• Penalties for Non-Compliance
• 2026 IRS Crypto Tax Planning Tips
• Final Takeaways
• FAQs About Is Crypto Taxable in the USA
• Sources 
• How to Trade Crypto on BTCC?
• BTCC FAQs

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How the IRS Treats Cryptocurrency for Tax Purposes

The Internal Revenue Service (IRS) treats crypto as property and not a currency. So most crypto transactions are taxable. These include when you exchange your crypto for US dollars, sell crypto, or spend it on goods or exchanges.

• Sales of crypto: The sale of crypto for cash is straightforward. That sale is considered a taxable event that either results in a gain or a loss.
• Exchanging one crypto for another: When you exchange one crypto for another, the IRS still considers it a taxable event. The way they see it, you’re selling one asset to buy another. So you have to report the trade with any profit or loss incurred based on the fair market value at the time you made the trade.
• Using crypto to pay for goods and services: The same thing applies when you use crypto to pay for goods and services. For instance, if you use Bitcoin to pay for an online trading course, you also have to report the transaction along with any capital gain or loss based on the difference from your original cost basis.
• Receiving crypto as income: If you get paid in crypto, you also have to pay tax. However, this type is treated as ordinary income, so you only have to pay your regular income tax rate. The same also applies if you receive crypto as mining or staking rewards or as airdrops.

New IRS Reporting Rules Starting in 2026

Starting in 2026, brokers will have to issue Form 1099-DA to report gross proceeds for transactions in 2025. This form is similar to Form 1099-B for securities. (Cost basis reporting  comes in later and some entities may receive extensions or exemptions).

You should note that brokers here refer to centralized exchanges and hosted wallet providers (depending on custodial type). 

The upside is that it simplifies tax reporting for you if you use brokers for your crypto transactions. The downside is that the rules require account-by-account reporting. So if you own multiple wallets (or accounts), each one will be reported separately.

How to Report Crypto Taxes on Your U.S. Tax Return

You need to use specific forms when you are reporting crypto taxes in the USA. These forms will highlight all transactions made within the reporting time frame. Note that you have to self-report everything and declare gains or losses even if you don’t receive a Form 1099-DA from your broker.

Reporting crypto taxes falls under two categories: as assets and as income.

• Reporting crypto as assets: The IRS sees crypto as property. If you trade, exchange, or spend your crypto, you either make a profit or incur a loss. You have to report these using Form 8949 and Schedule D (Form 1040). You use Form 8949 to report every single crypto disposal transaction during the tax year, while you use Schedule D to summarize the totals from Form 8949. The details on the form are then carried over to your main Form 1040.
• Reporting crypto as income: Any crypto transaction that doesn’t involve trading, exchanging, or spending falls under the income category. For this type of reporting, you need Form 1040. The crypto activities that fall under this category include income from mining or staking crypto, airdrops, promotional rewards, and gifted crypto. You also use Form 1040 to report any crypto you received as payment for services.

Remember that you must report all crypto transactions that happened within the period under review.

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Penalties for Non-Compliance

Refusing to file your crypto taxes comes with serious consequences. This can be as simple as penalties and can go up to interest and full-scale audits. The IRS can also institute criminal proceedings against you. The easiest way to avoid all these is to keep good records and make your tax reports on time.

• Penalties and Interest: If you don’t file your taxes properly or the IRS suspects that you’re attempting to evade taxes, you may pay penalties ranging from 20% to up to 75% of the underpaid tax. The penalties for late filing and late payment start at about 5% of unpaid taxes per month and 0.5% of unpaid taxes per month, respectively. The interest is compounded daily on both unpaid taxes and penalties.
• Criminal Sanctions: If a court finds you guilty of tax evasion, you can spend up to five years in jail. You may also be fined up to $100,000.

2026 IRS Crypto Tax Planning Tips

Here are some tips to help you navigate the crypto tax jungle.

• Keep detailed transaction records: Keep records of every transaction, including dates, amounts, fair market value in USD, and wallet IDs. This will help you file your taxes easily.
• Automation: If you have access to crypto tax software, use it to track your trades and cost basis.
• Consultant: You can also hire a tax expert to help review your financial situation and recommend the best course of action. This may cost a bit but could end up saving you more money in the long run.

Final Takeaways

So yes, crypto is taxable in the USA as per IRS rules. As such, you should keep records of all your crypto-related activities and report them accurately. Non-compliance is costly, so try to avoid it. You should also consider speaking with tax professionals to guide you.

As for crypto investors in the USA either beginners or experts alike, BTCC Exchange  is the best option to explore for safe trading, educational guides, hassle free and intuitive trading experience. 

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FAQs About Is Crypto Taxable in the USA

Q. How is crypto taxed in the USA?

In the U.S., the IRS taxes cryptocurrency as property if you sell, trade, or spend it, and as income if you receive it as payment for services or mining or staking rewards. You can buy or trade crypto assets seamlessly on BTCC.

Q. Do you have to report crypto under $600 in the USA?

Yes. You have to report all crypto transactions regardless of the amount.

Q. How to avoid crypto taxes in the USA?

You can avoid crypto tax by holding your crypto assets for longer or donating to a qualified charity. A tax professional will explain your possible options.

Q. Do you pay taxes on crypto if you don’t sell?

No. You don’t pay taxes if you buy and hold crypto. You only pay tax when you sell, trade, or spend it.

Q. Can the IRS track crypto?

Yes. The IRS uses information from brokers and also leverages blockchain analysis tools to track taxable crypto events.

Q. How much tax do I pay if I sell my crypto?

It depends on your gain (or loss) and how long you held the crypto.

Sources 

• IRS- Digital assets
• CNBC – What the new IRS guidance on crypto tax reporting means for investors
• Nerdwallet – Crypto tax rate
• IRS Gov – Final regulations and related IRS guidance for reporting by brokers
• Summ – How The IRS Knows You’ve Traded Crypto
• Bankrate- Your crypto transactions may soon show up on an IRS 1099 form
• Koinx- Penalties for Non-Compliance in Crypto Accounting and Tax Reporting

For more insightful educational updates about cryptocurrency, forex or altcoin trading, sign up to BTCC for remarkable trading experience and BTCC academy for free guidelines.