Bitcoin taxes explained: what's taxable, what isn't, and what to keep
US rules in plain English — the four events that trigger taxes, the four that don't, how the math works, and the records that make April painless.
BY RAFAEL ORTIZ10 MIN READ
Updated
NOT TAX ADVICE
This guide covers general US federal rules to help you ask better questions. It is not tax advice, rules change, and states differ — confirm your situation with a CPA or tax professional before filing.
The one idea everything follows from
The IRS treats bitcoin as property, not currency — like a stock, not like dollars. Buying and holding generally does not realize a gain, but receiving bitcoin as wages or mining income can be taxable before any sale. A later disposal can create a separate gain or loss between your basis (your cost basis) and what it was worth when you disposed of it. If you already know what you sold, our free bitcoin tax estimator runs the 2026 brackets for you.
Estimate your bill in about a minute
Enter your disposals and get short- and long-term tax split out, using the official 2026 IRS brackets. Nothing leaves your browser.
TAXABLE EVENTS
1Selling bitcoin for dollars
2Spending it — yes, buying a coffee is a disposal
3Trading it for another crypto
4Earning it — mining, staking, salary, rewards (ordinary income at receipt)
NOT TAXABLE
1Buying bitcoin with dollars and holding it
2Moving it between your own wallets — self-custody is not a sale
3Holding through any price change, forever, unrealized
4Gifting within the annual exclusion (~$19k/recipient in 2026 — confirm current limit)
How the math works
Gain = sale price − cost basis. How long you held decides the rate:
WORKED EXAMPLE
Bought $100 of BTC in 2024. Spent it on a $260 purchase in 2026. That's a disposal: $260 − $100 = $160 long-term gain, taxed at 0/15/20% depending on your income — even though you never "cashed out."
Losses work in reverse: sell below your basis and the loss offsets other gains, plus up to $3,000 of ordinary income per year ($1,500 if married filing separately; unused losses may carry forward). Note: the wash-sale rule currently doesn't apply to crypto — but Congress keeps proposing to change that, so verify before relying on it.
The records that make April painless
+Every buy: date, dollar amount, BTC received, fees. Exchanges export this — download the CSV yearly, don't trust them to exist forever.
+Every disposal: date, what you got for it, which coins you sold (lot selection — FIFO by default, specific-ID if you track it).
+Wallet transfers: keep the withdrawal record showing it went to your own address, so a transfer never gets misread as a sale.
+For covered broker transactions starting in 2025, brokers report 1099-DA forms to you and the IRS, with 2025 transactions reported in 2026. Reconcile those forms with your own records; a missing form does not remove a reporting obligation.
Common questions
Running a business? See our bitcoin for business guide for merchant tax treatment.
The IRS asks if I had digital-asset transactions. I only bought and held — what do I answer?
Buying with dollars and holding lets you answer "No" under current form instructions — but read the year's exact wording, it has changed before.
What about my ETF shares?
Spot bitcoin funds can have grantor-trust tax treatment. In taxable accounts, a fund’s bitcoin sales to pay expenses can create reportable gains or losses even if you keep your shares; see BlackRock’s tax explanation and your issuer’s annual tax information. Our ETF Flow Tracker tracks fund demand, not your tax basis. Eligible IRA accounts follow separate retirement-tax rules.
I mined a little bitcoin at home. Taxes?
Mined sats are ordinary income at their value when received, and that value becomes your basis. A Bitaxe earning ~$1–2/month is trivial but technically reportable — keep the pool payout history. Whether you can deduct the electricity and hardware against it depends on hobby vs. business classification — see our full breakdown.
Do I need special software?
If you buy occasionally on one exchange and rarely sell — no, the CSV plus your tax software handles it. Crypto tax tools earn their fee once you have many trades, multiple exchanges, or on-chain activity.