Cryptocurrency and Tax: What Digital Asset Holders Need to Know
What This Video Covers
The IRS treats cryptocurrency as property — not currency — which has significant implications for how digital asset transactions are taxed. This video covers the fundamentals of cryptocurrency taxation and what holders, traders and businesses accepting crypto need to understand.
Key topics addressed include:
- How the IRS classifies cryptocurrency and other digital assets
- Capital gains treatment for buying and selling cryptocurrency
- The tax implications of mining, staking and receiving crypto as compensation
- How DeFi, NFTs and other digital assets are treated
- Reporting requirements, including Form 1099-DA and the new broker reporting rules
- What to do if you have unreported crypto transactions
Why This Matters
The IRS has been clear that cryptocurrency transactions are taxable events. Every sale, exchange, or use of crypto to purchase goods or services is potentially a taxable event that must be tracked and reported. The rapid evolution of the digital asset space — including DeFi protocols, NFTs, staking rewards and layer-2 transactions — has created significant complexity for taxpayers and their advisors.
New legislation and IRS guidance continue to expand reporting requirements. Brokers and exchanges are now required to report transaction information to the IRS, meaning the era of untracked crypto transactions is coming to an end.
About the Presenter
Benjamin A. Goldburd, Esq.
Goldburd McCone LLP
Benjamin brings focused experience in IRS collection defense, including lien and levy disputes, CDP hearings and negotiated resolutions. Our team’s combined backgrounds in accounting, business and wealth management ensure that enforcement responses account for the full scope of a client’s financial position.
Frequently Asked Questions About Cryptocurrency Tax
Is cryptocurrency taxable?
Yes. The IRS treats cryptocurrency as property for federal tax purposes. This means that when you sell, exchange or use cryptocurrency, you must calculate the gain or loss based on your cost basis and report it on your return. The tax rate depends on how long you held the asset — short-term gains (held less than one year) are taxed at ordinary income rates, while long-term gains qualify for lower capital gains rates.
Do I owe taxes if I just hold cryptocurrency and do not sell?
Generally, no — simply holding cryptocurrency is not a taxable event. But receiving cryptocurrency as payment, from mining or staking, or as an airdrop typically is. And when you eventually sell or exchange the cryptocurrency, any appreciation from your original cost basis is taxable.
How do I calculate my cost basis?
Your cost basis is the amount you paid to acquire the cryptocurrency, including any fees. When you sell, the gain or loss is calculated as the difference between the sale price and your cost basis. For taxpayers with many transactions across multiple exchanges and wallets, tracking cost basis accurately can be complex — but it is essential for accurate reporting.
What if I did not report cryptocurrency transactions in prior years?
You may be able to file amended returns to correct prior-year omissions. Whether and how to do so depends on the amounts involved, your overall tax situation and any audit risk. An attorney can evaluate your exposure and recommend the most protective approach to coming into compliance.
Are NFTs taxed differently than other cryptocurrency?
The IRS has indicated that NFTs may be treated as collectibles in some cases, which would subject long-term gains to a higher maximum tax rate than other capital assets. The guidance in this area continues to evolve. If you have significant NFT activity, it is worth discussing the implications with a tax attorney who follows this space closely.