Bitcoin taxes explained: what's taxable, what isn't, and what to keep
US rules in plain English — the four events that trigger taxes, the four that don't, how the math works, and the records that make April painless.
NOT TAX ADVICE
This guide covers general US federal rules to help you ask better questions. It is not tax advice, rules change, and states differ — confirm your situation with a CPA or tax professional before filing.
The one idea everything follows from
The IRS treats bitcoin as property, not currency — like a stock, not like dollars. So the tax logic is the stock logic: nothing happens until you dispose of it, and then you owe tax on the gain between what you paid (your cost basis) and what it was worth when you disposed of it. If you already know what you sold, our free bitcoin tax estimator runs the 2026 brackets for you.
Estimate your bill in about a minute
Enter your disposals and get short- and long-term tax split out, using the official 2026 IRS brackets. Nothing leaves your browser.
TAXABLE EVENTS
1Selling bitcoin for dollars
2Spending it — yes, buying a coffee is a disposal
3Trading it for another crypto
4Earning it — mining, staking, salary, rewards (ordinary income at receipt)
NOT TAXABLE
1Buying bitcoin with dollars and holding it
2Moving it between your own wallets — self-custody is not a sale
3Holding through any price change, forever, unrealized
4Gifting within the annual exclusion (~$19k/recipient in 2026 — confirm current limit)
How the math works
Gain = sale price − cost basis. How long you held decides the rate:
WORKED EXAMPLE
Bought $100 of BTC in 2024. Spent it on a $260 purchase in 2026. That's a disposal: $260 − $100 = $160 long-term gain, taxed at 0/15/20% depending on your income — even though you never "cashed out."
Losses work in reverse: sell below your basis and the loss offsets other gains, plus up to $3,000 of ordinary income per year (the rest carries forward). Note: the wash-sale rule currently doesn't apply to crypto — but Congress keeps proposing to change that, so verify before relying on it.
The records that make April painless
+Every buy: date, dollar amount, BTC received, fees. Exchanges export this — download the CSV yearly, don't trust them to exist forever.
+Every disposal: date, what you got for it, which coins you sold (lot selection — FIFO by default, specific-ID if you track it).
+Wallet transfers: keep the withdrawal record showing it went to your own address, so a transfer never gets misread as a sale.
+Since 2025, exchanges issue 1099-DA forms to you and the IRS — your records need to match what they report.
Common questions
The IRS asks if I had digital-asset transactions. I only bought and held — what do I answer?
Buying with dollars and holding lets you answer "No" under current form instructions — but read the year's exact wording, it has changed before.
What about my ETF shares?
Spot ETFs are the simple case: normal brokerage 1099, same capital-gains rules as any stock, and they work in IRAs where gains can be deferred or tax-free — see our Bitcoin IRA rankings.
I mined a little bitcoin at home. Taxes?
Do I need special software?
If you buy occasionally on one exchange and rarely sell — no, the CSV plus your tax software handles it. Crypto tax tools earn their fee once you have many trades, multiple exchanges, or on-chain activity.