United States · Crypto Tax
Swapping crypto for crypto is a taxable sale in the US — not just cashing out to dollars.
US crypto tax guidance is scattered across a 2014 notice, an evolving FAQ page, and brand-new broker-reporting rules. Here are the six questions people get wrong most, each traced to the primary IRS source.
If I trade one crypto for another, like ETH for SOL, do I owe tax even though I never touched dollars?
Commonly misreportedYes. The IRS treats a crypto-for-crypto trade the same as a crypto-for-cash sale: you have a capital gain or loss equal to the difference between the fair market value of what you received and your basis in what you gave up. Converting to dollars is not what triggers the tax — the exchange itself is the taxable event.
Is cryptocurrency treated as property or as currency for federal tax purposes?
Property. Since 2014 the IRS has applied ordinary property-transaction rules to virtual currency rather than foreign-currency rules, meaning capital gains and losses apply the same way they would to stock or real estate. It is not treated as currency that could produce foreign-currency gain or loss.
Do I owe tax on staking rewards the moment I receive them, or only when I eventually sell?
Commonly misreportedAt receipt. The IRS applies the same rule to newly-created tokens that it applies to mining: once you have dominion and control over the tokens — meaning you could transfer, sell, or exchange them — their fair market value in dollars is ordinary income on that date. Selling later triggers a separate capital gain or loss measured from that basis. Note that brokers are explicitly told not to report staking payments on Form 1099-DA, so the reporting duty falls on you.
Will crypto exchanges start reporting my trades directly to the IRS?
Yes, for sales starting in 2025. Under final broker-reporting regulations, a person who regularly effects digital asset sales for others is a broker and generally must report those transactions, with digital assets treated as specified securities. This is new: prior to these rules there was no standardized third-party report of your trades comparable to a stock broker's 1099-B.
How do I figure out my cost basis if I don't track which specific coins I sold?
If you don't specifically identify the units disposed of, the IRS defaults you to first-in, first-out (FIFO): the earliest units you acquired are treated as the ones sold. Starting January 1, 2025, basis must generally be tracked on a wallet-by-wallet or account-by-account basis rather than pooled across everything you own, and a safe harbor lets you make a one-time reasonable allocation of existing basis to each wallet.
If I only bought crypto with US dollars and never sold or spent it, do I need to report anything?
No. If your only virtual currency activity for the year was purchasing it with real currency, you are not required to answer "yes" to the digital asset question on Form 1040 or report anything related to it. Reporting obligations begin when you sell, exchange, spend, or otherwise dispose of the asset.
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Tax intelligence, not tax advice. Every answer above cites primary law you can check; a qualified professional should review your specific situation before filing. TaxPulse — a PulseNetwork intelligence engine.