Crypto Tax Terms Explained (US, Not Tax Advice)

Plain-English meanings for the US tax words beginners meet first, and a six-question check on which actions are taxable. Search the list as you type. Nothing is saved or sent.

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Digital asset
The IRS word for crypto, stablecoins and NFTs. The IRS treats digital assets as property, not as currency.
Example: Bitcoin, ether and a stablecoin are all digital assets.
Taxable event
Something you do with a digital asset that can create a gain, a loss or income you must report.
Example: Selling for dollars, trading one coin for another, spending crypto, or getting paid in crypto.
Not a taxable event
Some actions do not create a gain or loss on their own.
Example: Buying crypto with dollars and holding it, or moving it between wallets you own.
Capital gain or loss
The difference between what you got when you sold, traded or spent a digital asset and your cost basis.
Example: If your basis was $100 and you sold for $150, the gain is $50.
Cost basis
What you paid for a digital asset, including certain fees. You need it to work out a gain or loss.
Example: Keep the date, amount and price of every purchase.
Fair market value
The value in US dollars at the time of a transaction. It is used for income and for trades.
Example: If you are paid in crypto, its dollar value when you receive it is income.
Holding period
How long you held the asset. One year or less is short-term. More than one year is long-term. They are taxed differently.
Example: Bought March 1 one year, sold March 2 the next: long-term.
Ordinary income
Crypto you receive for work, and some rewards, count as income at fair market value when you receive them.
Example: The IRS says staking rewards are income when you gain control of them (Rev. Rul. 2023-14).
Form 1099-DA
A form brokers, such as crypto exchanges, send to you and to the IRS about digital asset sales. It starts with sales on or after January 1, 2025.
Example: For 2025 sales, it shows gross proceeds. Basis reporting begins with certain sales in 2026.
Gross proceeds
The total value you received from a sale, before subtracting your cost basis.
Example: The 1099-DA for 2025 shows proceeds, so you must still work out your own basis.
Covered security
For Form 1099-DA, a digital asset generally acquired after 2025 in a broker’s custodial account and kept there until sold. Brokers must report basis for these.
Example: Coins bought before 2026, or moved in from another wallet, are usually “noncovered”: you track the basis yourself.
Wallet-by-wallet basis
From 2025, the IRS expects you to track cost basis separately for each wallet or account, not as one pool across all of them.
Example: Keep separate records for each exchange account and each self-custody wallet.
Form 8949 and Schedule D
The forms used to list each sale or trade and total your capital gains and losses on your federal return.
Example: Your 1099-DA tells you which Form 8949 box applies.
The digital asset question
Form 1040 asks whether you received, sold, exchanged or otherwise disposed of a digital asset during the year. You must answer yes or no.
Example: Just buying and holding with dollars is usually a “no”; ask a tax professional if unsure.
Records to keep
Dates, amounts, dollar values, fees and wallet addresses for every purchase, sale, trade, transfer and reward.
Example: Exchange statements and a simple spreadsheet are a good start.

Crypto tax terms explainer

Digital asset

Taxable event

Not a taxable event

Capital gain or loss

Cost basis

Fair market value

Holding period

Ordinary income

Form 1099-DA

Gross proceeds

Covered security

Wallet-by-wallet basis

Form 8949 and Schedule D

The digital asset question

Records to keep

Quick check: is it a taxable event?

Sources

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