Bitcoin taxes

The IRS treats bitcoin as property. Selling, swapping, or spending it is a sale, taxed on the difference between what you received and your cost basis. Coins held more than a year get the long-term capital gains rates. Coins held a year or less are taxed as ordinary income.

The general rules (cost basis, wallet-by-wallet tracking, the wash-sale rule) are in the crypto taxes overview. This page covers what is specific to bitcoin.

Block rewards and pool payouts are ordinary income at their value on the day you receive them. That amount becomes your basis, so a later sale is taxed only on the change in price since then. The holding period starts that day.

• Business: Schedule C. Deduct electricity, pool fees, hosting, and the rigs (100% bonus depreciation writes off hardware in the year you buy it). You owe 15.3% self-employment tax on net profit up to $184,500 and 2.9% above, and the profit can qualify for the 20% QBI deduction.
• Hobby: Schedule 1, line 8v. No self-employment tax, but no deductions either.

The test is profit motive: regular activity, business-like records, and a real attempt to make money.

New coins from a hard fork or an airdrop are ordinary income once you have dominion and control, meaning you can move, sell, or exchange them. The income is their value at that moment, which becomes your basis. If your exchange does not support the new coin and you cannot reach it, there is no income until you can.

A fork that gives you no new coins is not taxable, and your original basis does not change.

Paying for something with bitcoin is a sale. The proceeds are the value of what you bought, and the gain or loss is that value minus the basis of the coins you spent. The holding period of those coins sets the rate.

Giving bitcoin away is not a sale. Gifts up to $19,000 per recipient need no gift tax return, and the recipient generally takes your basis and holding period.

Long-term rates go by taxable income, with the gain stacked on top of ordinary income.

Lost keys, a dead drive, or a hacked wallet generally give you no deduction. Personal casualty and theft losses count only if they come from a federally or state-declared disaster. A coin that falls to almost nothing is not a loss until you sell it.

The exception is a Ponzi-type investment fraud, where you handed over money expecting a profit. That theft loss is still an itemized deduction in the year you discover it.

If you can still sell the coins, do that. The capital loss offsets gains, then up to $3,000 of ordinary income a year.

Single, $40,000 of wages, hobby miner. During 2026 you receive pool payouts worth $4,000 when paid. That is $4,000 of ordinary income on Schedule 1, and your basis in those coins is $4,000. You also sell coins bought two years ago for $10,000 and receive $20,000, a $10,000 long-term gain.

• Taxable income: $40,000 + $4,000 + $10,000 minus the $16,100 standard deduction = $37,900.
• Tax on the $27,900 ordinary part: 10% of $12,400 plus 12% of $15,500 = $3,100.
• The $10,000 gain stacks from $27,900 to $37,900, all under $49,450, so 0%.
• Federal tax: $3,100. The mining income cost $480 at 12%. The gain cost nothing.

Sold within a year of buying, the same gain would be ordinary income at 12%, or $1,200 more.

• Digital asset question: page 1 of Form 1040. Yes if you sold, spent, mined, or received forked or airdropped coins. No if you only bought and held.
• Sales, swaps, and spending: Form 8949, totals on Schedule D.
• Business mining: Schedule C, plus Schedule SE.
• Hobby mining, forks, and airdrops: Schedule 1, line 8v.
• Ponzi-type theft losses: Form 4684, then Schedule A.

Exchanges sent the first Form 1099-DA in early 2026, with gross proceeds only. For 2026 sales they add cost basis, but only for coins bought on that exchange from 2026 on. Coins you bought earlier, mined, or moved in from your own wallet arrive with no basis, so keep your own records. Self-custody wallets and peer-to-peer sales produce no form. You still report them.