Cryptocurrency gains are taxable events subject to IRS regulation.
Proper record-keeping is essential for accurate tax reporting.
Failing to report crypto income can lead to significant tax penalties.
Taxes
Crypto Taxes: Your Payday is Coming
Crypto Taxes: Your Payday is Coming
Crypto Taxes: Your Payday is Coming
Zoe Team and Josh Bennett, CFP®, EA (Zoe Network Advisor)
6 min read
Frequently Asked Questions
Frequently Asked Questions
Are my crypto trades taxable?
Yes, the IRS treats cryptocurrency as property, meaning capital gains or losses must be reported whenever you sell, trade, or spend crypto.
How do I track my crypto taxes?
Maintain detailed records of purchase dates, prices, and sale prices for every transaction to calculate your tax liability accurately.
What happens if I don’t report crypto income?
You risk audits, significant underpayment penalties, and potential legal issues for tax evasion if you intentionally omit crypto earnings.
You probably haven’t discussed crypto taxes with your friends, and if you have, you know that the tax implications of crypto aren’t really clear.
The Untouched Topic: Crypto Taxes
Have you been paying attention to the rise of the crypto markets? If not, you might be living under a rock. Over the past several years, cryptocurrencies have been an essential (and hyper trending) aspect of the investing world.
When people talk about crypto, the conversations focus on tech disruption, “massive gains,” and Elon Musk. Most of the time, you’re basing your conversation topics on theories of volatility and trading. The topic that remains untouched? Crypto taxes. Taxes are the least “sexy” among crypto topics but among the most impactful to your gains. You probably haven’t discussed crypto taxes with your friends, and if you have, you know that the tax implications of crypto aren’t really clear.
In this article, I’ll highlight a few rules and guidelines created by the IRS to help you navigate what you should expect from new tax codes as these regulations continue to emerge. First, let’s imagine a scenario:
You’re an innovative investor and hold a portfolio with crypto. You’re new(ish) to the DIY investing world, or just new to the crypto world. And although you wish it was just as easy making a profit and leaving it there… you know tax season is right around the corner and you’ll have to pay their cut. How much will you have to pay? We’ll break it down below.
How Do Crypto Taxes Work?
Many of the investments in the crypto space have taxation principles that are similar but not necessarily based on precedent. There are some misconceptions of crypto taxation, types of transactions, and issues with crypto. We’ll walk through them all.
Misconceptions of Crypto Taxes
First and foremost, let’s knock out some common misconceptions.
1. Yes, crypto is taxable.
The IRS looks at crypto similarly to the way it views stocks. But the easiest way to think of it is that cryptocurrencies are considered property. Just like other property, if you make money off of it, then those gains become taxable upon sale of the property.
2. You can’t hide from the IRS.
Because crypto uses secure and private distributed Ledger, people think the IRS can’t track it. So they don’t need to report it. In other words, people think they can hide their transactions in order to not get taxed for them.
This is a completely wrong mentality. The beauty of crypto is that everything happens on the ledger, therefore, every transaction you make lives on that ledger. That does not mean that the IRS doesn’t have the tools to track it. On the contrary, the IRS has made it very clear that they’re putting cryptocurrency taxes as a priority this year. They’re after crypto fraud, and not long from having a software that tracks your tax implications… probably better than you can.
By not paying taxes or at least even attempting to pay taxes on a best effort-basis to be compliant, you are likely going to be on the IRS’s radar (and not in a good way).
How is Crypto Really Taxed?
Trading:
For an event to be taxable, you don’t have to just go from a cryptocurrency back to US Dollars. Every transaction you make is taxable. For example, if you gained in Bitcoin, and then traded it for Ethereum, that is a taxable transaction. You don’t need to cash it out in order for it to be taxable. In the view of the IRS, whenever you are trading one coin for another, those are potentially taxable events. Rule of thumb: Any change in the underlying currency is a taxable event.
Purchasing:
If you buy things with Bitcoin, you are liquidating Bitcoin to purchase an item, so you are selling property in exchange for another item. Selling property is taxable, so you will owe a tax bill when you buy things with any crypto that has a capital gain.
Remember, in the eyes of the IRS; Crypto is a property, not a currency. If you use crypto as a currency, it doesn’t change the underlying assumptions that it gets taxed as property.
Staking:
If you’re not familiar with Staking, Staking is similar to a CD at a more traditional bank. You put up your coin as collateral, and you earn interest in the form of more tokens (or an alternate coin in some cases). The ongoing assumption is that staking gets taxed as income. However, there has been recent traction in lower tax courts that may alter how staking is taxed. The argument is that interest earned via staking is only taxable upon the sale of the token.
Issues in Crypto Taxes
Capital Losses:
Many investors assume that 9 out of 10 investments will go to zero. But like venture capital investing, you’re aiming for the one that goes up 1000x. You should be wary that in crypto there are many fraud or “rug pull” situations.
As of right now, you can only claim capital losses when you can trade out of a token at a loss. What happens to the coins where your coin becomes illiquid or loses everything? Many people believe that loss becomes a tax deduction. This is mistaken, it’s not a deduction and the IRS has been very clear about that.
As of the TCJA, no capital losses due to theft, rug pulls, fraud…etc. can be used as a tax deduction. Often in these situations, you cannot sell your crypto, so your money ends up lost in thin air without the ability to recoup any of your losses.
Tracking Your Taxes:
We’ve covered that many investors have no idea what their tax situation currently is. Tracking taxes is a big issue. Although there are software solutions that help financial advisors, tax professionals, and end-users, they aren’t perfect (yet).
Getting the integrations and CSV exports from multiple sources and wallets can leave a jumbled mess. You need to be highly experienced to match transactions correctly. The software helps a ton, but again, not bulletproof.
Koinly, Zenledger, Cointracker.io are others that offer tracking services and some can collaborate directly with your tax professional.
Cryptocurrency Should Be Your #1 Tax Priority
The digital asset world is changing, and taxation is changing along with it. The most important thing to understand is that crypto is taxable! Not only is it taxable, but the taxation of your digital coins is much more complex than you might think. You’re not taxed only when you cash out to USD, you’re potentially taxed with every transaction. There are misconceptions, types of transactions, and issues when it comes to cryptocurrency.
If you can’t understand, track, manage and stay compliant with your crypto, reach out to a tax professional who can help you.
If you do, be careful… we’re all pretty new to the crypto world. Some professionals are educated in the topic and understand how it works, others try to take advantage of the current market need, but don’t have genuine expertise in the space.
Make sure you are vetting any professional you work with, whether on the financial planning side or tax side of crypto. Most importantly, make your taxes a priority if you’re investing in crypto.
You probably haven’t discussed crypto taxes with your friends, and if you have, you know that the tax implications of crypto aren’t really clear.
The Untouched Topic: Crypto Taxes
Have you been paying attention to the rise of the crypto markets? If not, you might be living under a rock. Over the past several years, cryptocurrencies have been an essential (and hyper trending) aspect of the investing world.
When people talk about crypto, the conversations focus on tech disruption, “massive gains,” and Elon Musk. Most of the time, you’re basing your conversation topics on theories of volatility and trading. The topic that remains untouched? Crypto taxes. Taxes are the least “sexy” among crypto topics but among the most impactful to your gains. You probably haven’t discussed crypto taxes with your friends, and if you have, you know that the tax implications of crypto aren’t really clear.
In this article, I’ll highlight a few rules and guidelines created by the IRS to help you navigate what you should expect from new tax codes as these regulations continue to emerge. First, let’s imagine a scenario:
You’re an innovative investor and hold a portfolio with crypto. You’re new(ish) to the DIY investing world, or just new to the crypto world. And although you wish it was just as easy making a profit and leaving it there… you know tax season is right around the corner and you’ll have to pay their cut. How much will you have to pay? We’ll break it down below.
How Do Crypto Taxes Work?
Many of the investments in the crypto space have taxation principles that are similar but not necessarily based on precedent. There are some misconceptions of crypto taxation, types of transactions, and issues with crypto. We’ll walk through them all.
Misconceptions of Crypto Taxes
First and foremost, let’s knock out some common misconceptions.
1. Yes, crypto is taxable.
The IRS looks at crypto similarly to the way it views stocks. But the easiest way to think of it is that cryptocurrencies are considered property. Just like other property, if you make money off of it, then those gains become taxable upon sale of the property.
2. You can’t hide from the IRS.
Because crypto uses secure and private distributed Ledger, people think the IRS can’t track it. So they don’t need to report it. In other words, people think they can hide their transactions in order to not get taxed for them.
This is a completely wrong mentality. The beauty of crypto is that everything happens on the ledger, therefore, every transaction you make lives on that ledger. That does not mean that the IRS doesn’t have the tools to track it. On the contrary, the IRS has made it very clear that they’re putting cryptocurrency taxes as a priority this year. They’re after crypto fraud, and not long from having a software that tracks your tax implications… probably better than you can.
By not paying taxes or at least even attempting to pay taxes on a best effort-basis to be compliant, you are likely going to be on the IRS’s radar (and not in a good way).
How is Crypto Really Taxed?
Trading:
For an event to be taxable, you don’t have to just go from a cryptocurrency back to US Dollars. Every transaction you make is taxable. For example, if you gained in Bitcoin, and then traded it for Ethereum, that is a taxable transaction. You don’t need to cash it out in order for it to be taxable. In the view of the IRS, whenever you are trading one coin for another, those are potentially taxable events. Rule of thumb: Any change in the underlying currency is a taxable event.
Purchasing:
If you buy things with Bitcoin, you are liquidating Bitcoin to purchase an item, so you are selling property in exchange for another item. Selling property is taxable, so you will owe a tax bill when you buy things with any crypto that has a capital gain.
Remember, in the eyes of the IRS; Crypto is a property, not a currency. If you use crypto as a currency, it doesn’t change the underlying assumptions that it gets taxed as property.
Staking:
If you’re not familiar with Staking, Staking is similar to a CD at a more traditional bank. You put up your coin as collateral, and you earn interest in the form of more tokens (or an alternate coin in some cases). The ongoing assumption is that staking gets taxed as income. However, there has been recent traction in lower tax courts that may alter how staking is taxed. The argument is that interest earned via staking is only taxable upon the sale of the token.
Issues in Crypto Taxes
Capital Losses:
Many investors assume that 9 out of 10 investments will go to zero. But like venture capital investing, you’re aiming for the one that goes up 1000x. You should be wary that in crypto there are many fraud or “rug pull” situations.
As of right now, you can only claim capital losses when you can trade out of a token at a loss. What happens to the coins where your coin becomes illiquid or loses everything? Many people believe that loss becomes a tax deduction. This is mistaken, it’s not a deduction and the IRS has been very clear about that.
As of the TCJA, no capital losses due to theft, rug pulls, fraud…etc. can be used as a tax deduction. Often in these situations, you cannot sell your crypto, so your money ends up lost in thin air without the ability to recoup any of your losses.
Tracking Your Taxes:
We’ve covered that many investors have no idea what their tax situation currently is. Tracking taxes is a big issue. Although there are software solutions that help financial advisors, tax professionals, and end-users, they aren’t perfect (yet).
Getting the integrations and CSV exports from multiple sources and wallets can leave a jumbled mess. You need to be highly experienced to match transactions correctly. The software helps a ton, but again, not bulletproof.
Koinly, Zenledger, Cointracker.io are others that offer tracking services and some can collaborate directly with your tax professional.
Cryptocurrency Should Be Your #1 Tax Priority
The digital asset world is changing, and taxation is changing along with it. The most important thing to understand is that crypto is taxable! Not only is it taxable, but the taxation of your digital coins is much more complex than you might think. You’re not taxed only when you cash out to USD, you’re potentially taxed with every transaction. There are misconceptions, types of transactions, and issues when it comes to cryptocurrency.
If you can’t understand, track, manage and stay compliant with your crypto, reach out to a tax professional who can help you.
If you do, be careful… we’re all pretty new to the crypto world. Some professionals are educated in the topic and understand how it works, others try to take advantage of the current market need, but don’t have genuine expertise in the space.
Make sure you are vetting any professional you work with, whether on the financial planning side or tax side of crypto. Most importantly, make your taxes a priority if you’re investing in crypto.
Disclosures: Zoe Financial, Inc. ("Zoe Financial") is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Zoe Financial provides investment advisory services and access to independent registered investment advisers through its platform. The information provided by Zoe Financial is for educational and informational purposes only and should not be construed as personalized investment advice or as an offer to buy or sell any security. All investments involve risk, including possible loss of principal. Past performance is not indicative of future results. Clients should consult with their own financial, tax, or legal professionals before making any investment decisions. The material presented by Zoe Financial is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Material presented has been gathered from sources believed to be reliable, however Adviser cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Past performance is no guarantee of future results. Zoe Financial does not provide legal or tax advice, and nothing contained in these materials should be taken as legal or tax advice. SEC Registration does not constitute an endorsement of Zoe Financial by the SEC nor does it indicate that Zoe Financial has attained a particular level of skill or ability. The sole purpose of this material is to inform, and it in no way is intended to be an offer or solicitation to purchase or sell any security, other investment or service, or to attract any funds or deposits. Investments mentioned may not be appropriate for all clients. Before making any investment, each investor should carefully consider the risks associated with the investment, as discussed in the applicable offering memorandum, and make a determination based upon their own particular circumstances, that the investment is consistent with their investment objectives and risk tolerance. Lower expenses do not guarantee better investment performance. Certain information contained herein may constitute forward-looking statements. Due to various risks and uncertainties, actual events, results or the performance of a fund may differ materially from those reflected or contemplated in such forward-looking statements.
Disclosure: This page is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.
Investment advisory services are provided by Zoe Financial, Inc. (Zoe Financial), an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Learn more about Zoe Financial on the SEC’s Investment Adviser Public Disclosure website. Brokerage services are provided by Zoe Securities LLC and Apex Clearing Corporation, members of the Financial Industry Regulatory Authority Inc. (FINRA) and Securities Investor Protection Corporation (SIPC). Learn more about Zoe Securities and Apex on FINRA’s BrokerCheck website.
The information in the visuals above is for illustrative purposes only and does not represent an actual user's account, balance, or return. Zoe Financial does not provide tax or legal advice.
Explore the Zoe Wealth Platform with AI
Some of this content may have been generated with the assistance of AI. Please review and sense-check all outputs, as AI tools can occasionally produce incomplete or inaccurate information.
In certain situations, you may be required to disclose that the content was “generated by AI.” Please confirm any specific disclosure or labelling requirements with Compliance.
(646) 680-9244
support@zoefin.com
666 Third Ave, 6th Floor
New York, NY, 10017
Copyright © 2026 Zoe Financial, Inc. | All rights reserved
Find an Advisor
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Disclosure: This page is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.
Investment advisory services are provided by Zoe Financial, Inc. (Zoe Financial), an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Learn more about Zoe Financial on the SEC’s Investment Adviser Public Disclosure website. Brokerage services are provided by Zoe Securities LLC and Apex Clearing Corporation, members of the Financial Industry Regulatory Authority Inc. (FINRA) and Securities Investor Protection Corporation (SIPC). Learn more about Zoe Securities and Apex on FINRA’s BrokerCheck website.
The information in the visuals above is for illustrative purposes only and does not represent an actual user's account, balance, or return. Zoe Financial does not provide tax or legal advice.
Explore the Zoe Wealth Platform with AI
Some of this content may have been generated with the assistance of AI. Please review and sense-check all outputs, as AI tools can occasionally produce incomplete or inaccurate information.
In certain situations, you may be required to disclose that the content was “generated by AI.” Please confirm any specific disclosure or labelling requirements with Compliance.
(646) 680-9244
support@zoefin.com
666 Third Ave, 6th Floor
New York, NY, 10017
Copyright © 2026 Zoe Financial, Inc. | All rights reserved
Find an Advisor
Retirement Planning
Disclosure: This page is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.
Investment advisory services are provided by Zoe Financial, Inc. (Zoe Financial), an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Learn more about Zoe Financial on the SEC’s Investment Adviser Public Disclosure website. Brokerage services are provided by Zoe Securities LLC and Apex Clearing Corporation, members of the Financial Industry Regulatory Authority Inc. (FINRA) and Securities Investor Protection Corporation (SIPC). Learn more about Zoe Securities and Apex on FINRA’s BrokerCheck website.
The information in the visuals above is for illustrative purposes only and does not represent an actual user's account, balance, or return. Zoe Financial does not provide tax or legal advice.
Explore the Zoe Wealth Platform with AI
Some of this content may have been generated with the assistance of AI. Please review and sense-check all outputs, as AI tools can occasionally produce incomplete or inaccurate information.
In certain situations, you may be required to disclose that the content was “generated by AI.” Please confirm any specific disclosure or labelling requirements with Compliance.
(646) 680-9244
support@zoefin.com
666 Third Ave, 6th Floor
New York, NY, 10017
Copyright © 2025 Zoe Financial, Inc. | All rights reserved