Yes, crypto is taxed. Here’s when you have to pay.

Core Insights - Understanding cryptocurrency taxation is crucial for anyone involved in buying, selling, or trading digital assets [1] Taxation on Cryptocurrency Transactions - Taxes are owed when cryptocurrency is sold for more than its purchase price or when one digital asset is exchanged for another, such as converting bitcoin to ethereum [2] - Tax reporting occurs in the year the transaction takes place, with the tax owed based on the holding period of the asset [3][4] Capital Gains Tax Rates - Short-term capital gains tax applies to assets held for one year or less, taxed at ordinary income rates ranging from 10% to 37% [5] - Long-term capital gains tax applies to assets held for more than one year, with rates of 0%, 15%, or 20% depending on taxable income and filing status [6] Tax Deductions for Losses - Capital losses can offset capital gains up to $3,000 per year, with excess losses carried forward to future tax years [8][10] - Unrealized losses do not count for tax deductions, and losses must be realized through the sale of the asset [11] Non-Taxable Situations - Certain actions do not trigger tax liabilities, such as holding crypto without selling, transferring between personal wallets, purchasing crypto with U.S. dollars, receiving crypto as a gift, or donating to charity [12][17] Reporting Requirements - Starting January 1, 2026, brokers will issue a new form, the 1099-DA, to report digital asset transactions, but taxpayers must still track their cost basis [13][14] - Taxpayers are responsible for accurately reporting their transactions, as discrepancies can lead to issues with the IRS [15][16] Tax Calculation Process - Taxpayers should collect transaction histories, determine cost basis, identify proceeds from sales, and classify transactions as short-term or long-term [23] - Crypto tax calculators can assist in managing high trading volumes and generating necessary reports for tax filing [19][20] Tax Implications of Crypto Usage - Exchanging one cryptocurrency for another or using crypto to purchase goods or services is considered a taxable event [21][22] - Staking rewards are taxed as ordinary income upon receipt, similar to interest earned [23][24]