Crypto is taxable in most jurisdictions. The specific rules vary, but the categories are similar across major economies. This is a primer — not tax advice. Tax rules are jurisdiction-specific and change frequently. Consult a licensed tax professional for your situation.
The main tax events
In most jurisdictions, these are tax events (likely creating a taxable gain or loss):
- Selling crypto for fiat — capital gain or loss based on proceeds minus cost basis
- Trading one crypto for another — the same; ETH→BTC is a sale of ETH and a purchase of BTC
- Spending crypto on goods/services — typically treated as a disposal at fair market value
- Receiving airdrops — typically taxed as ordinary income at FMV when received
- Mining rewards — typically ordinary income at FMV when mined
- Staking rewards — typically ordinary income at FMV when received (some jurisdictions still treating as “received only when withdrawn”)
- DeFi yield — typically ordinary income (treatment varies)
These are NOT typically tax events:
- Buying crypto with fiat
- Holding crypto without selling
- Moving crypto between wallets you control
- Donating crypto to qualified charities (in some jurisdictions)
Short-term vs long-term capital gains
Most jurisdictions distinguish:
- Short-term — held less than one year. Taxed at ordinary income rates (often 22–37% in the US, varying by jurisdiction)
- Long-term — held more than one year. Taxed at preferential rates (15–20% in the US for most filers)
The holding period restart is a common gotcha: trading one crypto for another resets the clock. ETH→BTC means your BTC has a new acquisition date.
Cost basis methods
When you sell, which units of crypto were sold? Three common methods:
- FIFO (First In, First Out) — sell the oldest units first. Default in most jurisdictions.
- LIFO (Last In, First Out) — sell the newest units first. Available in some jurisdictions.
- Specific identification — choose exactly which units to sell. Requires detailed records.
Specific identification often produces the lowest tax bill but requires the most paperwork.
Record-keeping
For every transaction, you need:
- Date
- Asset
- Quantity
- Fair market value in your reporting currency at the time
- Cost basis (for sales)
- Transaction fees
Exchange exports rarely have all of this in a clean format. Crypto tax software (Koinly, CoinTracker, Cointracking, Recap) connects to exchanges + wallets and produces tax-form-ready output. Cost: $50–500/year depending on volume.
DeFi makes it harder
DeFi transactions are difficult to track for tax purposes:
- LP deposits/withdrawals — are these dispositions? Treatment varies.
- Reward harvests — many small income events
- Bridges — same asset across chains, different addresses
- Failed/reverted transactions — gas paid, nothing received
If you DeFi heavily, the tax software fee is worth it. Doing it by hand is impractical.
Common mistakes
- Not reporting. Exchanges increasingly report to tax authorities (1099 forms in US starting in 2025–2026 tax years). Discrepancies trigger audits.
- Treating crypto-to-crypto as non-taxable. It is a taxable event in most jurisdictions.
- Forgetting airdrops and staking rewards. Small individually, large collectively. All taxable as income.
- Not tracking cost basis from year to year. Crypto held for a decade still needs its original cost basis documented when sold.
Tax-loss harvesting
Crypto positions in losses can often be sold to realise the loss for tax purposes, then re-purchased. The “wash sale rule” that applies to stocks in some jurisdictions does NOT explicitly apply to crypto in the US (as of 2026), though this could change. Other jurisdictions have varying rules.
Tax-loss harvesting is legitimate planning. Talk to a tax professional about how to do it correctly in your jurisdiction.
Jurisdiction-specific notes
US: Form 8949 + Schedule D for capital gains. 1099-DA from exchanges starting 2025–2026. Wash sale rule does not currently apply to crypto.
UK: Capital gains tax, with a £3,000 annual exempt amount (2024–25). Self Assessment form. HMRC has detailed crypto guidance.
Germany: Crypto held more than 1 year is tax-free (large advantage). Income tax on short-term gains.
Portugal: Was a tax haven; that has changed. 28% on short-term gains as of 2023.
Singapore: No capital gains tax. Income tax on professional traders.
This is not tax advice
This is a starting framework. Crypto tax rules are jurisdiction-specific, change frequently, and have substantial edge cases. For anything material, talk to a licensed tax professional in your jurisdiction.