For U.S. federal income tax purposes, calculate gain or loss on a cryptocurrency sale by subtracting the asset’s adjusted cost basis from the amount realized. The result is not automatically the sale proceeds: acquisition cost, qualifying fees, which units you sold, and how long you held them all matter. This guide covers cryptocurrency held as a capital asset; other countries and some kinds of crypto activity can follow different rules.
Start with the gain-or-loss formula
The IRS treats digital assets as property for federal income tax purposes. For a sale for U.S. dollars, the calculation is:
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Capital gain or loss = amount realized − adjusted basis
The IRS describes the amount realized as cash received plus the fair market value of services received to effect the sale, reduced by allocable digital-asset transaction costs. Calculate the amounts in U.S. dollars. A gain means the amount realized exceeds basis; a loss means it is less. Neither result is necessarily the tax bill: tax treatment depends on the taxpayer’s full return and circumstances.
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The IRS’s digital-asset FAQ gives the same core rule for sales for dollars or similar currency. It also explains that exchanges of digital assets for other property may require a gain-or-loss calculation, even when no dollars change hands.
Calculate each sale in five steps
- List the disposition. Record the asset, transaction date and time, number of units, wallet or account, and what you received. A sale for dollars is a disposition; an exchange for other property can be one too.
- Establish basis for the specific units sold. For purchased assets, basis generally starts with the U.S.-dollar cost. Acquisition transaction fees, commissions, transfer taxes, and other acquisition costs are included in basis under the 2025 Form 8949 instructions. Units received as income or in another event may have a different basis history.
- Find the amount realized. For a cash sale, start with cash received and include the fair market value of any services received to effect the sale, then subtract allocable costs of the disposition.
- Subtract basis from amount realized. Apply the formula separately to each disposition, using the basis and costs supported by your records.
- Classify the holding period and report it. A capital asset held for one year or less is short-term; held for more than one year is long-term. Use the Form 8949 and Schedule D instructions for the tax year being filed.
Worked example
Suppose you buy a unit for $1,000, pay $10 in qualifying acquisition costs, later sell it for $1,500, and pay $15 in qualifying sale costs. Basis is $1,010; amount realized is $1,485; the gain is $475. This is an arithmetic illustration, not an IRS statistic or a complete tax-return determination. The actual result depends on the units sold, their documented basis, allowable allocable costs, and tax classification.
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Which fees count?
The IRS defines digital-asset transaction costs as amounts paid for services to effect a purchase, sale, or disposition. Examples include transaction or “gas” fees, commissions, and transfer taxes. Acquisition costs can increase basis; allocable disposition costs can reduce amount realized. Keep records that show what each fee was for and which transaction it relates to.
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A transfer between your own wallets or accounts is different: the IRS FAQ says costs paid to move assets between your own accounts are not digital-asset transaction costs for a purchase, sale, or disposition. Do not treat every network fee as automatically deductible or apply one blanket rule to all fees.
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How to identify the units and determine basis
When you sell fewer than all units of the same asset in an account or wallet, the units selected for the sale can affect basis and holding period. IRS guidance describes specific-identification rules for hosted and unhosted wallets, with requirements that depend on the transaction period and wallet circumstances. If units are not specifically identified under the applicable rule, a default identification rule may apply. Check the current-year FAQ and instructions rather than assuming that “first in, first out” always applies.
Keep records that substantiate purchases, receipts, sales, exchanges, and other dispositions. The IRS identifies relevant details including asset type, transaction date and time, units, U.S.-dollar fair market value at the time of the transaction, and basis. Preserve confirmations and statements from exchanges and wallets alongside your own transaction history.
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Report the disposition on the right tax-year forms
For a digital asset held as a capital asset, the IRS directs taxpayers to Form 8949 and Schedule D. Form labels and reporting procedures can change, so use the instructions for the return year rather than copying an older form’s boxes. The 2025 Form 8949 instructions add digital-asset-specific boxes: G, H, and I for short-term transactions, and J, K, and L for long-term transactions.
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What Form 1099-DA does—and does not do
Broker reporting on Form 1099-DA begins for covered transactions on or after January 1, 2025. Covered brokers include certain custodial platforms and other providers that take possession of assets in covered sale or exchange transactions. The 2025 Form 8949 instructions say that Form 8949 may not be needed for certain transactions when all applicable broker statements report basis to the IRS and no correction or adjustment is required. Check the instructions’ conditions for your transaction.
A broker statement is not a substitute for reconciling your complete records. Compare the reported proceeds and any basis information with your acquisition history, fees, transfers, and the units you actually disposed of. Correct errors and account for transactions not covered by the statement under the applicable instructions.
When this calculation is not the whole tax answer
This method assumes the cryptocurrency was held as a capital asset. Cryptocurrency held for sale to customers in a trade or business, compensation, staking or mining rewards, and other receipt circumstances can involve ordinary income, business reporting, or a separate basis calculation before a later sale. The sale calculation should not be used to collapse those earlier tax events into one capital-gains figure.
The article addresses U.S. federal income tax only. It does not establish state or local treatment, and it cannot determine an individual’s tax rate or total tax from the sale price alone. The IRS FAQ distinguishes rules and guidance for transactions before January 1, 2025 from those on or after that date, so check the guidance and forms applicable to the transaction and filing year.
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