Crypto is property: swaps, staking, airdrops and tracking

Education, not tax advice: rules, rates and thresholds change every year, so confirm anything you plan to act on with a qualified tax professional.

The IRS decided in 2014 that cryptocurrency is property, not currency, and every rule since has followed from that one word. Property rules mean every disposal is a taxable event, basis must be tracked per unit, and the sheer number of transactions a crypto trader generates makes reporting a volume problem more than a conceptual one.

Every disposal is a taxable event

You realize a gain or loss whenever you dispose of a coin. Disposal includes:

• Selling for dollars.
• Swapping one coin for another. ETH for SOL is a sale of ETH at its fair market value, then a purchase of SOL with that value as basis.
• Spending crypto on goods or services. Buying a $5 coffee with bitcoin is a sale of that fraction of bitcoin.
• Converting to a stablecoin. USDC is property too; BTC to USDC is a disposal of BTC.
• Paying gas fees in a token (a small disposal of the token, with the fee itself usually added to the basis of what was acquired or deducted from proceeds).

What is not a disposal: buying crypto with dollars, moving coins between wallets or exchanges you own, and holding through any price move.

Worked example. Buy 1 ETH for $2,000. Later, when ETH is $3,000, swap it for 20 SOL. Gain on ETH = $3,000 − $2,000 = $1,000 (short- or long-term by holding period). Basis of the 20 SOL = $3,000, or $150 each. Two months later, SOL is $120 and you swap all 20 back to ETH: loss = $2,400 − $3,000 = −$600. No dollars touched, two taxable events.

Income events: staking, airdrops, mining, rewards

Receiving coins as a reward is ordinary income at the fair market value on the day you gain control of them, and that value becomes the basis.

• Staking rewards: income when received (Revenue Ruling 2023-14 confirmed this for the common case).
• Airdrops: income when you have dominion and control, whether you asked for them or not (Revenue Ruling 2019-24).
• Mining, liquidity rewards, referral bonuses, interest from lending platforms: income at receipt.
• Hard forks: income if new coins are received and controllable.

Example. You stake ETH and receive 0.10 ETH on a day ETH is $3,200. Income: $320, ordinary, this year, whether or not you sell. Basis of that 0.10 ETH: $320. Sell it a year later at $4,000/ETH: capital gain of $400 − $320 = $80, long-term. Two taxable events from one reward.

Rewards received in tokens with no liquid market still have to be valued; this is a common source of disagreement and a good reason to keep screenshots of the value at receipt.

Basis tracking: wallet by wallet

Through 2024 many taxpayers used a "universal" pool of all their coins for basis. From January 1, 2025, basis must be tracked per wallet or per account (Revenue Procedure 2024-28). The default method within a wallet is FIFO; specific identification is allowed only if the units are identified before or at the time of the transaction, and the exchange or your software records it. A transfer between your own wallets carries basis with it, so your records must show basis leaving one place and arriving at another.

1099-DA is the new broker form: US exchanges report gross proceeds for the 2025 tax year onward, and basis for transactions from 2026 onward for coins bought and sold on the same platform. It will not know the basis of anything you deposited from elsewhere, so mismatches will be routine and your own records will be needed to correct them, exactly as with transferred stock.

No wash sale rule, at the time of writing

Because crypto is property rather than a security, Section 1091 does not apply. A trader can sell at a loss and buy back immediately, and the loss stands. Legislation to extend wash sales to digital assets has been proposed in several sessions of Congress; check the current status before relying on it, and note that the economic substance doctrine can still be raised against transactions with no purpose other than a tax loss.

Form 8949 volume

A crypto trader with three exchanges, two DeFi wallets and a year of activity might have 5,000 taxable events. Each belongs on Form 8949. Nobody types 5,000 lines. Two workable approaches:

1. Report summary totals per category on Form 8949 and attach a statement listing every transaction (software generates this).
2. Import the software's transaction file into the tax filing package, which fills 8949 automatically.

Either way, the work happens in a crypto tax tool. Products in this category (Koinly, CoinTracker, CoinLedger, ZenLedger and others; none is endorsed here) connect to exchanges by API, import wallet addresses, reconcile transfers between them, price every event, and output 8949 data and an income report. They are only as good as the inputs: an unrecognized wallet, an exchange that closed, or a missed transfer shows up as a zero-basis "sale" and a phantom gain. Reconciling those is the real job, and it is much easier done monthly than in April.

The checkbox

Form 1040 asks, near the top, whether you received, sold, exchanged or otherwise disposed of a digital asset during the year. Answering "no" while an exchange files a 1099-DA in your name is a mismatch that computers catch.

Key idea: Crypto is property: every swap, spend and stablecoin conversion is a sale, every reward is income at receipt, basis is tracked wallet by wallet, and the volume means software plus disciplined transfer records are the only way to produce an accurate Form 8949.

Try it: List every exchange, wallet and DeFi protocol you have touched this year, including dormant ones. Next to each, write whether you can export a full transaction history today. Any "no" is a future zero-basis problem; fix it while the platform still exists.

Recap

• Selling, swapping, spending and converting to stablecoins are all taxable disposals; transfers between your own wallets are not.
• Staking, airdrops, mining and other rewards are ordinary income at fair value on receipt; that value becomes basis.
• From 2025, basis is tracked per wallet; FIFO unless specific ID is documented at the time.
• 1099-DA reporting starts with 2025 proceeds; it will not know basis for deposited coins.
• No wash sale rule currently applies to crypto; use software and reconcile monthly to handle Form 8949 volume.