Cryptocurrency and digital assets are treated as property by the IRS, not currency. This means that every transaction—whether you sell crypto for fiat, trade one token for another, or buy a product using crypto—is a taxable event that triggers capital gains or losses.
Capital Gains: Short-Term vs. Long-Term
If you hold a digital asset for one year or less before selling or trading, any gain is taxed at your ordinary income tax rate. Assets held for more than a year qualify for lower long-term capital gains tax rates (0%, 15%, or 20%).
Staking, Mining, and Airdrops
Income received from crypto mining, staking rewards, or airdrops is taxed as ordinary income in the year it is received, valued at the fair market value of the tokens on the day they enter your wallet.
Because exchange-provided tax reports can be incomplete, maintaining independent tracking software is essential to report gains accurately and avoid IRS penalties.