Cryptocurrency continues to evolve as a mainstream investment and payment method, and with it comes increasing scrutiny from the IRS. Whether you’re trading Bitcoin, mining Ethereum or using crypto to make purchases, it’s important to understand how these activities affect your tax obligations.

What Is Taxable?

The IRS treats cryptocurrency as property, not currency. This means that any time you dispose of or use crypto, it’s considered a capital transaction, similar to selling stocks or real estate. Common taxable events include:

  • Selling crypto for fiat (USD, EUR, etc.)
  • Trading one crypto for another
  • Using crypto to purchase goods or services
  • Receiving crypto as payment or income
  • Mining or staking crypto
  • Receiving airdrops or rewards

These transactions must be reported based on their fair market value at the time of the event. Short-term gains (held less than one year) are taxed as ordinary income, while long-term gains (held more than one year) are taxed at capital gains rates.

What Is Not Taxable?

Not all crypto activities trigger taxes. Non-taxable events include:

  • Buying cryptocurrency with fiat
  • Transferring crypto between wallets you own
  • Holding crypto without selling or using it

Reporting Requirements

The IRS now requires taxpayers to answer a digital asset question on their tax return. If you had any digital asset transactions, you must report them, even if they didn’t result in a gain or loss. Forms commonly used include:

  • Form 8949 for capital gains/losses
  • Schedule 1 for ordinary income
  • Schedule C for business income

Recordkeeping is important. You should track:

  • Dates of acquisition and sale
  • Fair market value at each transaction
  • Cost basis and transaction fees

Cryptocurrency taxation is complex and constantly evolving, but you don’t have to navigate it alone. At Adams Brown, our tax professionals understand the unique challenges of digital assets and can help you stay compliant while minimizing risk. From tracking transactions and calculating gains to preparing accurate tax filings, we provide the guidance and tools you need to avoid costly mistakes. Whether you’re an investor, miner or business accepting crypto payments, contact an Adams Brown advisor to help you make informed decisions and stay ahead of changing regulations.