Quick Answer
Report crypto gains and losses on Form 8949 and Schedule D, just like stocks. Short-term gains (held less than 1 year) are taxed as ordinary income up to 37%, while long-term gains get preferential rates of 0%, 15%, or 20%. You can deduct up to $3,000 in net losses per year against ordinary income.
Best Answer
Robert Kim, CPA
Best for anyone who bought, sold, or traded cryptocurrency during the tax year
How to report cryptocurrency gains and losses
Cryptocurrency is treated as property by the IRS, which means every sale, trade, or exchange triggers a taxable event that must be reported on your tax return. You'll use Form 8949 (Sales and Other Dispositions of Capital Assets) to list each transaction, then transfer the totals to Schedule D.
Example: Basic crypto trading scenario
Let's say you made these crypto transactions in 2026:
For your 2026 tax return, you only report the March sale:
This $7,500 gain is taxed as ordinary income at your marginal tax rate (potentially up to 37% for high earners).
The step-by-step reporting process
Step 1: Gather your transaction records
You need the date, amount, and fair market value in USD for every crypto transaction. This includes:
Step 2: Calculate your basis and gains/losses
For each sale or exchange:
Step 3: Complete Form 8949
List each transaction separately on Form 8949. You'll need:
Key factors that affect your crypto taxes
What you should do
1. Use crypto tax software like CoinTracker or TokenTax to track transactions automatically
2. Export your transaction history from every exchange you used
3. Keep detailed records of dates, amounts, and purposes for all transactions
4. Consider our [return-scanner](#) to identify any missed crypto reporting from previous years
Key takeaway: Every crypto transaction is taxable. Report all gains and losses on Form 8949, and remember you can deduct up to $3,000 in net losses per year against ordinary income.
*Sources: [IRS Notice 2014-21](https://www.irs.gov/pub/irs-drop/n-14-21.pdf), [IRS Virtual Currency FAQ](https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions)*
Key Takeaway: Every crypto sale, trade, or exchange must be reported on Form 8949. You can deduct up to $3,000 in net losses per year, and long-term gains get better tax rates than short-term.
Tax rates for cryptocurrency gains based on holding period and income level
| Holding Period | Tax Treatment | Rate for $50K Income | Rate for $100K Income | Rate for $200K Income |
|---|---|---|---|---|
| Less than 1 year | Ordinary income | 22% | 24% | 32% |
| More than 1 year | Long-term capital gains | 0% | 15% | 15% |
| Net losses | Ordinary income offset | Up to $3,000 deduction | Up to $3,000 deduction | Up to $3,000 deduction |
More Perspectives
Robert Kim, CPA
Best for new crypto investors who made their first purchases recently
Starting simple with crypto taxes
If you're new to crypto investing, the tax rules might seem overwhelming, but they're actually similar to how stocks are taxed. The key insight: every time you sell or trade crypto, it's a taxable event.
Your first crypto tax scenario
Most young investors start simple:
If you're in the 22% tax bracket, you'll owe about $66 in federal taxes on this gain.
What counts as a taxable event
This trips up many new investors:
The "HODL" advantage
If you're planning to hold long-term anyway, there's a tax benefit: investments held more than one year qualify for long-term capital gains rates, which are much lower than ordinary income rates. For most young investors, this means 0% or 15% instead of 22%+ on short-term gains.
Key takeaway: Keep it simple your first year—buy quality crypto, hold for over a year if possible, and use exchange transaction exports to make tax filing easier.
Key Takeaway: Start with buy-and-hold to minimize taxable events, and remember that crypto-to-crypto trades are taxable too.
Robert Kim, CPA
Best for investors using crypto as part of a diversified retirement strategy
Crypto in retirement accounts vs. taxable accounts
If you're investing in crypto for retirement, location matters significantly for taxes. Traditional and Roth IRAs can hold certain crypto investments, but the tax treatment is completely different from taxable accounts.
Taxable account crypto (most common)
When you hold crypto in regular brokerage or exchange accounts:
Tax-loss harvesting strategy
For retirement savers, crypto's volatility creates tax-loss harvesting opportunities:
Example scenario:
Important: The wash sale rule doesn't currently apply to crypto (unlike stocks), so you can buy back immediately.
Retirement account considerations
Some retirement accounts can hold crypto through self-directed IRAs, but:
Key takeaway: For most retirement savers, holding crypto in taxable accounts provides more tax flexibility through loss harvesting, even though you'll pay capital gains taxes.
Key Takeaway: Taxable accounts offer more tax flexibility for crypto through loss harvesting, despite the annual reporting requirements.
Sources
- IRS Notice 2014-21 — Virtual Currency Guidance
- IRS Virtual Currency FAQ — Frequently Asked Questions on Virtual Currency Transactions
Related Questions
Reviewed by Robert Kim, CPA on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.