How are Bitcoin gains taxed in the US?
The complete map, current rules.
Every scenario where the IRS cares about your Bitcoin, in one page. Buying, selling, spending, mining, gifts, inheritance, Roth IRA. What's taxable, at what rate, and what form you file. This is not legal or tax advice.
Reading time: ~15 minutes · Deep dives: Tax-Loss Harvesting, Asset Location, Roth Conversion Ladder, Stepped-Up Basis.
The IRS treats Bitcoin as property, not currency. Every disposal, sale, spend, swap, even for another crypto, is a taxable event. Hold over 1 year for long-term capital gains (0–20%); under 1 year is ordinary income (up to 37%). Mining income is taxed at receipt, then again on disposal.
- Buying Bitcoin with USD is not taxable. Selling, spending, swapping, or gifting above $19,000 triggers a tax event.
- Long-term gains (held >1 year): 0%, 15%, or 20% depending on income. Short-term: taxed as ordinary income up to 37%.
- Mining and staking rewards are taxed as ordinary income at fair market value when received.
- Cost basis method matters: FIFO, LIFO, or specific identification can change your tax bill significantly.
- Bitcoin has no wash-sale rule as of 2026, you can sell at a loss, immediately rebuy, and still claim the deduction.
Not tax advice. This page summarizes general U.S. tax rules as best this site can describe them for tax year 2026. Tax law changes annually. Rates and thresholds should be confirmed against current IRS publications before you act on them. For anything more than $10K in gains, hire a CPA who understands Bitcoin.
The IRS treats Bitcoin as property, not currency. This is established by IRS Notice 2014-21, the original guidance classifying virtual currency as property for federal tax purposes, and refined by Rev. Rul. 2023-14 don't trust, verify×DON'T TRUST, VERIFYClaim: Specific IRS revenue ruling number and scope for crypto staking guidance.Verify at: IRS.gov ↗Verify exact ruling number and that it has not been superseded. covering staking rewards and related treatment. Every time you dispose of Bitcoin, selling it, spending it, trading it, gifting it in specific cases, you may owe capital gains tax on the difference between what you paid and what you got. If you just buy and hold, there is zero tax until you dispose. Long-term holds (>12 months) are taxed dramatically lower than short-term holds.
Buying Bitcoin
Buying Bitcoin with U.S. dollars is not a taxable event. You're just converting one form of property (cash) into another (BTC). No tax. No form.
What you should track: the date, dollar amount, BTC amount, and price per BTC of every purchase. This is your cost basis. You'll need it years later when you sell or spend. Tax software (Koinly, CoinTracker) imports from River, Strike, Cash App, and Coinbase automatically.
Selling Bitcoin for dollars
Capital gain = sale price − cost basis. If you held for more than 12 months before selling, it's a long-term capital gain (much lower rate). If 12 months or less, short-term, taxed as ordinary income.
Married filing jointly brackets are roughly double. Thresholds are adjusted for inflation annually. There's also a Net Investment Income Tax (NIIT) of 3.8% on top, for high earners (MAGI > $200K single / $250K joint).
Short-term gains stack on top of your W-2 income and are taxed at your marginal income tax bracket: 10%, 12%, 22%, 24%, 32%, 35%, or 37%. On a high-income sale, a short-term gain can be taxed nearly 2x the equivalent long-term gain. Hold 12 months plus a day before selling if you have any choice about it.
Rule #1 of taking profits: hold 12 months plus a day. On $100,000 of gains, the difference between short-term (~37% = $37K) and long-term (15% = $15K) is $22,000. That's one rule, one line of code, two-week delay. Free money.
Spending Bitcoin
The IRS treats spending BTC the same as selling. If you buy a $5 coffee with Bitcoin that cost you $2 to acquire, you have a $3 capital gain. On every transaction. Yes, really.
This is why most U.S. holders don't spend Bitcoin, the tracking overhead is brutal. Better: spend fiat for daily purchases, DCA any savings into BTC, hold until retirement or major purchase. A de minimis exemption for small Bitcoin transactions has been proposed repeatedly in Congress but has not yet been passed .
Mining income
Mining rewards are taxed as ordinary income at the fair market value on the day you received them. That amount also becomes your cost basis. Later, when you sell or spend those coins, the gain vs. that cost basis is taxed again as capital gains.
Staking rewards (on altcoins, Bitcoin doesn't have staking) and mining rewards are treated identically for tax purposes under Rev. Rul. 2023-14.
Gifts
You can gift up to the annual exclusion (roughly $19,000 per recipient in 2026 ) without any tax filing. Above that, you file Form 709 (Gift Tax Return) but don't actually owe any tax until you exceed the lifetime exemption (~$13.99M in 2026 ).
The recipient inherits your cost basis, not the market value at gift time. If you gift $10K worth of BTC that you bought for $500, when they sell, they pay capital gains on the full $9,500 gain.
Inheritance (stepped-up basis)
When Bitcoin is inherited, the heir's cost basis is "stepped up" to the fair market value at the date of death. All capital gains that accrued during the original owner's lifetime are wiped away for tax purposes.
Example: Dad bought 1 BTC in 2015 for $300. Dies in 2040 when BTC is $2M. Son inherits that BTC with a new cost basis of $2M. Son immediately sells for $2M → zero taxable gain. If Dad had sold the day before dying, it would have been a $1.9997M capital gain and tax bill.
This is one of the single largest tax advantages available to Bitcoin holders, and it's why inheritance planning matters so much. Die holding Bitcoin, and you legally pass tax-free generational wealth to your heirs, up to the federal estate tax exemption. See Stepped-Up Basis for the full mechanics and pitfalls.
Bitcoin in a Roth IRA
A Roth IRA is funded with after-tax dollars. All growth and all qualified withdrawals (age 59½+, held 5+ years) are completely tax-free. If Bitcoin goes 10x inside your Roth, you owe zero federal tax on the gain.
Since January 2024, spot Bitcoin ETFs (IBIT, FBTC, BITB, ARKB, etc.) are held inside Roth IRAs at Fidelity, Schwab, and most brokerages, no special "crypto IRA" provider needed. Contribution limit is $7,500/year ($8,600 if 50+) in 2026 . Max the Roth IRA every single year as priority #2 in the order of operations. A multi-decade Roth can also be built via a Roth conversion ladder.
Form 8949: what you actually file
Every taxable Bitcoin disposal in a given tax year gets reported on IRS Form 8949 (Sales and Other Dispositions of Capital Assets), then summarized on Schedule D. Each row on Form 8949 has:
- Description of property (e.g., "0.25 BTC")
- Date acquired
- Date sold/disposed
- Proceeds (USD you received)
- Cost basis (USD you paid)
- Gain or loss
- Short-term or long-term (hold period check)
If you made 400 DCA purchases and 3 sales that year, you might have hundreds of rows, each DCA batch can be "lot-matched" to a sale using FIFO, LIFO, or HIFO accounting. Tax software handles this automatically; doing it by hand is a miserable weekend.
Tax software: Koinly vs. CoinTracker
Both import from River, Strike, Cash App, Coinbase, hardware wallets (via public key watch-only mode), and can export a completed Form 8949 PDF. They compete on price, accuracy edge cases, and accountant-friendliness.
| Feature | Koinly | CoinTracker |
|---|---|---|
| Free tier | Up to 10,000 txns (view only) | Up to 25 txns (view + basic export) |
| Paid tier starts | ~$49/yr (100 txns) | ~$59/yr (100 txns) |
| Form 8949 export | Yes | Yes |
| TurboTax integration | Yes | Yes (native Intuit partner) |
| Accounting method choice | FIFO / LIFO / HIFO / Specific ID | FIFO / HIFO / Specific ID |
| Lightning wallet support | Limited | Limited |
| Best for | Heavy DCA'ers, lot-optimizers | Integrated TurboTax filers |
, both services change their tiers annually. Check koinly.io/pricing and cointracker.io/pricing for current.
State residency for large exits
State income tax is applied in addition to federal. If you're planning a large BTC sale ($500K+ gain), moving your domicile to a no-state-income-tax state before selling can save 5–13% in state tax alone.
| State | Income Tax | Capital Gains | Notes |
|---|---|---|---|
| Tennessee | 0% | 0% | Hall tax on investment income repealed effective Jan 1, 2021, TN has no state income tax on wages OR capital gains[10] |
| Florida | 0% | 0% | Retirement-friendly, no estate tax |
| Texas | 0% | 0% | High property tax offsets some gains |
| Nevada | 0% | 0% | Gaming-oriented economy |
| Washington | 0% | 7% (over ~$270K) | New capital gains tax since 2022 |
| Wyoming | 0% | 0% | Pro-Bitcoin legislation |
| California | Up to 13.3% | Up to 13.3% | Capital gains taxed as ordinary income |
| New York | Up to 10.9% | Up to 10.9% | NYC adds another ~3.9% local |
California, New York, and New Jersey aggressively audit former residents who move and claim new domicile right before a large sale. To succeed, you need to actually move, sell/rent out your prior home, register to vote in the new state, get a new driver's license, move your family, spend more than 183 days outside the old state (the common state-residency threshold; each state sets its own standard, and California in particular uses a facts-and-circumstances domicile test rather than a strict day count ), close old state bank accounts and loyalty programs. Halfway doesn't work.
On a $1M BTC sale, moving from California (13.3%) to Tennessee (0%) saves $133,000. On a $5M sale, $665,000. That pays for the move several times over. More in Exit Strategy and Asset Location.
What the IRS already knows
Assume they see everything. U.S. exchanges (Coinbase, Kraken, Gemini, River, Strike) all file Form 1099-B reporting your transactions to the IRS. Starting with tax year 2025, a new Form 1099-DA specifically for digital assets also applies . The "crypto is anonymous" era ended around 2020.
Every Form 1040 since 2020 has included the question: "At any time during [year], did you receive, sell, exchange, or otherwise dispose of any digital asset?" Answering no when you did is tax fraud.
Correct move: report everything honestly. Use tax software. Pay what you owe. If you under-report and get audited (which happens at a higher rate for digital asset filers), penalties can be 20–75% of the unpaid tax plus interest.
Wash-sale rules and crypto: current status
The wash-sale rule (IRC §1091) prevents investors from claiming a tax loss on a security if they buy the same or substantially identical security within 30 days before or after the sale. It was written specifically for securities, and the IRS classifies Bitcoin as property (under Notice 2014-21[1]), not a security.
The wash-sale rule does not apply to Bitcoin under current U.S. tax law. You can sell Bitcoin at a loss, immediately repurchase, and still claim the tax loss. This is the Bitcoin-only tax advantage traditional securities investors don't have verify×DON'T TRUST, VERIFYClaim: The wash-sale rule does not apply to Bitcoin under current U.S. tax law.Verify at: IRS Notice 2014-21 ↗ · congress.gov ↗This is active legislative territory. Multiple bills have been introduced to extend the wash-sale rule to cryptocurrency. Verify current status before acting on tax-loss harvesting strategy..
Concretely: sell BTC at a loss in December, capture the tax deduction, buy it back the same day. On $10,000 of losses in a top federal bracket (plus state), the deduction is worth around $3,000 to $4,000 depending on your state. See Tax-Loss Harvesting for the full step-by-step playbook.
Legislative risk (watch this)
Multiple bills have been introduced in Congress to extend the wash-sale rule to cryptocurrency. None have passed as of this page's last update. The provision has appeared in several versions of Build Back Better and related tax-reconciliation packages over 2021 to 2025, and it tends to resurface in revenue-raising proposals. The closer crypto gets to a security-style classification (via ETFs, broker reporting under Form 1099-DA[6], or SEC-led frameworks), the more likely this change becomes.
Before using tax-loss harvesting strategies on Bitcoin in any given tax year:
- Check the current status of the wash-sale rule as it applies to digital assets at irs.gov.
- Search congress.gov for any enacted legislation extending §1091 to digital assets.
- For any position above ~$10K in realized losses, consult a CPA who specifically understands crypto tax. The rule change, if enacted, could be retroactive to the tax year in which it passes.
Use once per December (while this is still legal) if your portfolio has any BTC with a cost basis higher than current price. Takes 5 minutes on most exchanges. Can offset up to $3,000 of ordinary income per year, with losses carrying forward indefinitely.
Quick answers.
Five deep dives, in order
The umbrella page above covers the basics. These five pages take each lever to its full depth.
Related tax-strategy deep dives
- IRS Notice 2014-21 - foundational "virtual currency is property" guidance - irs.gov/pub/irs-drop/n-14-21.pdf
- IRS Form 8949 instructions - irs.gov/forms-pubs/about-form-8949
- IRS Form 1040 Digital Asset question - irs.gov/forms-pubs/about-form-1040
- IRS Publication 544 (Sales and Other Dispositions of Assets) - irs.gov/publications/p544
- IRS Rev. Rul. 2023-14 (staking income) - irs.gov/pub/irs-drop/rr-23-14.pdf
- IRS Form 1099-DA (digital asset broker reporting, 2025+) - irs.gov/forms-pubs/about-form-1099-da.
- 2026 LTCG brackets, annual gift exclusion, lifetime estate exemption, IRA contribution limits - confirm in current IRS Rev. Proc. 2025-X before citing specific dollar amounts - irs.gov
- Koinly pricing - koinly.io/pricing
- CoinTracker pricing - cointracker.io/pricing
- Tennessee Hall Income Tax repeal - Public Chapter 181 (2016), phased down to full repeal effective January 1, 2021. Tennessee Department of Revenue - tn.gov/revenue
- IRC § 1091 wash-sale rule applies to "stock or securities"; Bitcoin is classified as property under IRS Notice 2014-21 and therefore falls outside the rule today. Extensions to digital assets have been proposed in the Build Back Better Act (2021), the Lummis-Gillibrand Responsible Financial Innovation Act (2022), and subsequent budget reconciliation bills. - congress.gov
See the glossary for plain-English definitions of every term used here.
See the full Financial Q&A for direct answers to 80+ common questions on personal finance and Bitcoin.
Last updated 2026-04-14. Tax law changes annually. This is educational content, not legal or tax advice. For personal decisions involving more than $10K in gains, hire a CPA.
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