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.
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. So the tax logic is the stock logic: nothing happens until you
dispose of it, and then you owe tax on the gain between what you paid (your
cost basis) and what it was worth when you disposed of it.
How the math works
Gain = sale price − cost basis. How long you held decides the rate:
HELD ≤ 1 YEARHELD > 1 YEAR
CalledShort-term gainLong-term gain
Taxed asOrdinary income (10–37%)0%, 15%, or 20%
TakeawayTrading is expensivePatience is a tax strategy
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 (the rest carries 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.
+Since 2025, exchanges issue 1099-DA forms to you and the IRS — your records need to match what they report.