How much crypto tax do I owe?

Disclaimer: This article is intended as an informative piece. This is not accounting or tax advice. Please speak to a qualified tax professional about your specific circumstances before acting upon any of the information in this article.

Figuring out how much tax you need to pay the IRS can be a complex process. You'll need to look not only at the transactions you made in the tax year you are filing for, but also at your earlier transactions to establish your cost basis (broadly, what you paid for your cryptocurrency, although different rules set the basis of assets you received as gifts, inheritances or income). Your cost basis ultimately determines how much profit you made, and how much tax you owe as a result.

For US federal tax purposes, cryptocurrency is treated as property rather than currency. Disposing of a cryptocurrency is therefore a taxable event, which should be recorded and reported on your tax filings.

Disposing of a cryptocurrency includes actions such as:

However, transferring cryptocurrencies between your own wallets and buying cryptocurrencies with fiat currency (USD) are not classed as disposals, and therefore are not taxable in the US.

FIFO (First In First Out) is the default identification method within each wallet or account. A different method, such as LIFO (Last In First Out) or HIFO (Highest In First Out), can only be used where the units sold are validly identified. For assets held with a custodial broker, the rules that apply after 2025 generally require you to give the broker a sufficiently specific identification, or have a standing instruction in place, no later than the date and time of the transaction. The IRS has granted transitional relief that allows the identification to be made in your own records instead for transactions through the end of 2026 (Notice 2025-7, as extended by Notice 2026-20), and separate rules apply to assets you hold in your own wallets, so adequate contemporaneous records are essential either way. Since January 1, 2025, cost basis must also be tracked wallet by wallet rather than in one universal pool. We cover this in more detail in our cost basis methods article.

With FIFO, for instance, you look at the price of the earliest cryptocurrency you acquired in that wallet when working out your cost basis. So if you bought 1 BTC for $20k and later sold it for $30k, you would potentially need to pay tax on the $10k difference.

Eligible transaction costs must also be handled correctly when calculating each gain or loss: costs of acquiring an asset generally increase its cost basis, while costs of disposing of it generally reduce the amount realized. Be aware that paying a fee in crypto can itself create a separate disposal.

Be aware that certain US brokers report digital asset dispositions to you and the IRS on Form 1099-DA: gross-proceeds reporting generally began for transactions from January 1, 2025, and basis reporting generally begins from January 1, 2026 for certain covered assets acquired after 2025 and kept in the same custodial broker account. Even where you receive a 1099-DA, you are still responsible for calculating your own basis and reporting your gains correctly, especially if you have moved assets between exchanges and wallets.

You also need to accurately price, in USD, the cryptocurrency you are disposing of when establishing the basis price as well as the disposal price. This can be difficult information to obtain and tedious to record for each and every transaction.

With Recap, you can quickly and securely connect your exchanges and wallets and generate a tax report detailing your gains and income for the year, calculated in line with IRS guidance. You can choose your cost basis method in Recap's tax settings.

Recap also produces the relevant information for the required IRS tax forms that need to be submitted, streamlining the entire process of calculating your cryptocurrency tax gain or loss. You can also easily integrate with TurboTax online or for desktop - sign up now to try it out for free.

​Need to sort out your crypto taxes? Use Recap, the privacy focused cryptocurrency accounting software to calculate the taxable gain or loss on your cryptocurrency investments!