In 2026, most crypto transactions including trading, staking, and airdrops are taxable and must be reported as either capital gains or ordinary income.

Tax season brings real confusion for crypto investors. The rules have gotten clearer since 2021, but plenty of questions remain about what actually triggers a tax bill and how to report it correctly.

What crypto activities create taxable events? How do you calculate capital gains on trades? What records do you actually need to keep? This crypto tax guide for 2026 covers the practical answers investors need to file correctly and avoid costly mistakes.

What Creates Tax Obligations

Most confusion starts with understanding what even counts as taxable. Buying cryptocurrency with dollars creates no immediate tax consequence. The IRS only cares when you get rid of cryptocurrency somehow.

Getting rid of crypto happens more ways than people realize. Obviously selling for cash counts. Less obvious: trading Bitcoin for Ethereum also triggers a tax event on the Bitcoin side. The IRS treats this as two separate transactions: selling Bitcoin, then buying Ethereum with the proceeds. You calculate gain or loss on the Bitcoin you traded away.

Using crypto to buy things works the same way. Spending Bitcoin on a purchase means disposing of Bitcoin. You figure out whether those specific coins gained or lost value since you acquired them. Most people completely miss tracking these transactions.

Earning cryptocurrency through mining, staking, or receiving airdrops creates regular income. Whatever the coins were worth when they showed up in your wallet becomes taxable income that year. Selling those same coins later creates a second, separate tax event based on any price change after you got them.

Infographic showing taxable vs non-taxable crypto activities: buying and holding are not taxable, while selling, trading, spending, and earning are taxable

Quick Reference: Common Transactions

Activity	Tax Status	Tax Type
Buying crypto with USD	Not Taxable	-
Selling crypto for USD	Taxable	Capital Gains
Trading BTC for ETH	Taxable	Capital Gains
Receiving staking rewards	Taxable	Ordinary Income

Figuring Out Gains and Losses

The basic calculation stays simple enough: what you sold for minus what you paid equals your gain. Someone who bought Ethereum at $2,000 including fees and sold at $3,500 has a $1,500 gain to report.

Timing completely changes your tax bill though. Hold crypto less than a year and gains get taxed as regular income. For high earners that means rates up to 37% federally. Hold past one year and you qualify for much lower capital gains rates—0%, 15%, or 20% depending on your total income. The same $10,000 gain costs $3,700 versus $2,000 just based on holding period.

Multiple purchases at different prices create real headaches. Buy Bitcoin three separate times at $30K, $40K, and $50K. Sell one Bitcoin at $60K. Which purchase did you sell? The IRS assumes your earliest purchase unless you specifically document otherwise at the time of sale. Some people prefer picking which units to sell for tax purposes, but you need records proving which ones you chose.

Losses work in your favor. Made $8,000 on some coins but lost $5,000 on others? You report $3,000 net gain. Losses beyond your gains can reduce regular income by up to $3,000 yearly. Any excess carries forward to offset gains or income in future years.

Income from Mining and Staking

Receiving cryptocurrency as payment or rewards creates ordinary income immediately. Mining rewards, staking yields, and airdrops all count. The dollar value when you received them becomes your reported income for that year.

That same value becomes your starting point for later calculations. Get a $1,000 airdrop, report $1,000 income. Sell those coins later for $1,400 and you have $400 additional capital gain. Sell for $800 instead and you have a $200 capital loss deduction.

DeFi makes this messier because the rules remain unclear in many situations. Initial yield farming rewards pretty clearly count as income. But what about providing liquidity? Impermanent loss? Auto-compounding? Tax professionals disagree on proper treatment for various DeFi scenarios.

Keeping Records That Hold Up

As of 2026, most major exchanges now provide detailed tax reports to users, making record keeping easier than in previous years.

Good documentation prevents disasters later. You need transaction dates, amounts, dollar values at the time, what the transaction accomplished, and who the counterparty was when relevant.

Exchange records help but come with serious problems. Choosing best crypto exchanges with reliable transaction history exports simplifies record keeping and ensures access to documentation required for tax reporting. Several exchanges have shut down or restricted access, leaving users without their transaction histories. Download your records every month and keep your own copies somewhere safe.

Tax software built specifically for crypto automates most of this pain. If you’re comparing tools, see our guide to the best crypto tax software for 2026.These programs connect to exchanges, import transaction data automatically, and calculate all your gains and losses. For anyone trading more than occasionally, the annual subscription cost beats trying to track everything manually.

Keep records for seven years minimum. The IRS can look back that far when examining returns. Lose your 2023 records in 2028 and you face problems during an audit. Store backup copies in multiple locations—external drives, cloud storage, whatever works.

Common Mistakes That Cause Problems

Thinking crypto-to-crypto trades avoid taxes ranks as the most frequent mistake. They absolutely do not. Every trade means calculating gain or loss on whatever you traded away, regardless of whether dollars entered the picture.

Small transactions add up surprisingly fast. Using crypto for minor purchases throughout the year creates dozens of small taxable events. These seem easy to ignore until you realize you underreported by thousands of dollars across all those little transactions.

The IRS added a cryptocurrency question right on the main tax form now. Checking yes then failing to report any activity basically invites an audit. This question alone dramatically increased enforcement attention on crypto taxes.

Harvesting Losses Strategically

Cryptocurrency's volatility creates unusual opportunities compared to stocks. Monitoring the crypto fear and greed index helps identify optimal timing for tax-loss harvesting during market fear phases when prices hit lows. Selling losers to offset gains while staying invested makes sense.

Crypto currently lacks the wash sale rule that affects stocks. You can sell Bitcoin at a loss one day and buy it right back the next, fully deducting the loss while maintaining your market position. This loophole might close eventually but works fine for 2026 taxes.

Year-end reviews help most people. Looking at your positions in December lets you realize losses offsetting gains from earlier in the year. Those losses save taxes at whatever your rate is, creating immediate value rather than just carrying forward to future years.

Getting It Right

Cryptocurrency taxes come down to tracking everything carefully, knowing what triggers obligations, and keeping detailed records. Most situations fit into two buckets—gains or losses when you sell or trade, and income when you earn or receive.

Tax software designed for crypto eliminates most calculation headaches. Complex situations involving heavy DeFi use or large holdings probably justify paying a tax professional who understands cryptocurrency specifically.

Proper compliance protects you from penalties while letting you make smarter decisions about when to sell and how to harvest losses strategically. Understanding these basics puts you way ahead when April comes around.