Ethereum taxes

The IRS treats ETH as property. Selling, swapping, or spending it is a sale, and the gain or loss depends on your basis and holding period. The general rules (wallet-by-wallet basis, Form 1099-DA, the digital asset question) are in the crypto taxes overview. This page covers what differs on Ethereum.

Most of it comes down to two ideas: rewards are income when you get them, and almost every on-chain action is a sale of something.

Staking rewards are ordinary income. Under Rev. Rul. 2023-14 you report their fair market value in the year you gain control over them. That is usually the day they land in your wallet or exchange account and you can sell or move them. It does not matter whether you sell them, or whether you stake solo or through an exchange.

That amount becomes your basis, and the holding period starts that day.

Gas is a transaction cost, so treat it like a broker commission.

• Buying or minting: add the gas to your basis.
• Selling or swapping: subtract the gas from your proceeds.
• Failed transactions, approvals, and transfers: no deduction. Individuals cannot deduct investment expenses.

Every swap is a sale. Trading ETH for USDC, or one token for another on a DEX, disposes of what you gave up at the value of what you got. Stablecoins count. There is no like-kind exception for crypto.

Interest from a lending protocol and fees paid out by a liquidity pool are ordinary income when received, like staking rewards.

Liquidity pools themselves are a gray area. The IRS has not said whether depositing two tokens for an LP token is a sale. The conservative view treats the deposit and the withdrawal as swaps and recognizes gain or loss on each. The other view sees no sale until you dispose of the underlying tokens. Pick one and apply it consistently.

Buying an NFT with ETH is two events: a sale of the ETH, and a purchase of the NFT with a basis of the ETH's value plus gas.

Selling an NFT is a capital gain or loss, long-term if you held it more than a year. The rate can differ. The IRS has said it will look through an NFT to what it represents. If that is a collectible, such as a work of art, the NFT is one too, and long-term gains are taxed at up to 28% instead of 0%, 15%, or 20%.

The IRS has not addressed wrapping ETH into WETH. The conservative view treats it as a taxable swap: you recognize any gain or loss on the ETH when you wrap, and the WETH starts a new holding period at that day's value. The other view is that nothing changed hands, since WETH is redeemable one for one. Unwrapping raises the same question, so use the same treatment both ways.

Single, $95,000 of wages, standard deduction of $16,100, so $78,900 of taxable income before crypto.

• March: 0.5 ETH of staking rewards arrive when ETH is $3,000. Report $1,500 of ordinary income. Basis in that 0.5 ETH: $1,500. Tax at 22%: $330.
• June: sell 2 ETH bought in 2023 for $1,600 each plus $50 of gas (basis $3,250). Sale price $3,000 each less $30 of gas, so proceeds are $5,970. Long-term gain: $2,720.
• Taxable income is now $83,120, above the $49,450 top of the 0% bracket, so the gain is taxed at 15%: $408.

Federal tax on the year's Ethereum activity: $738.

• Sales, swaps, and NFTs: Form 8949, then Schedule D. Short-term in Part I, long-term in Part II. Collectible gains also go through the 28% rate gain worksheet.
• Staking rewards, lending interest, and pool fees: Schedule 1, line 8v (digital assets received as ordinary income). If staking is a business, Schedule C instead, with self-employment tax.
• Form 1099-DA: exchanges report your 2026 sales and, new this year, cost basis. Coins you moved in from a wallet may show no basis. No one reports your own-wallet DeFi and NFT activity, so you report it yourself.
• Digital asset question: page 1 of Form 1040. Answer yes.