How Cryptocurrency Is Taxed in a Non-IRA Account

How cryptocurrency is taxed in a Non-IRA account and the required reporting can seem daunting. Cryptocurrency feels like a different kind of asset, but the IRS doesn’t see it that way. Since 2014, the agency has classified Bitcoin, Ethereum, and every other digital token as “property,” not currency. That single classification is the foundation for almost everything about how crypto gets taxed, and it’s worth understanding before you file your next return.

Every Disposal Is a Taxable Event

Because crypto is property, the same rules that apply to selling stock apply to selling, trading, or spending crypto. That means you trigger a taxable event any time you sell crypto for dollars, trade one coin for another (say, Bitcoin for Ethereum), or use crypto to buy something, from a coffee to a car. In each case, you owe tax on the difference between what the crypto was worth when you acquired it (your cost basis) and what it was worth at the moment you disposed of it.

Simply buying crypto with cash and holding it isn’t taxable. Neither is transferring crypto between wallets you own, as long as you keep records showing it’s the same asset moving, not a sale.

Capital Gains: Short-Term vs. Long-Term

How much you owe depends heavily on how long you held the asset. If you held it for one year or less before disposing of it, any gain is taxed as a short-term capital gain, at your ordinary income tax rate (10% to 37% for 2026, depending on your bracket).

If you held it for more than a year, the gain qualifies for long-term capital gains treatment, taxed at 0%, 15%, or 20%, depending on your taxable income. High earners should also factor in the 3.8% Net Investment Income Tax, which kicks in once modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married couples filing jointly. That gap between short- and long-term rates is one of the few tax levers investors can actually control: holding a position past the one-year mark can meaningfully cut your tax bill.

Capital Losses Can Work in Your Favor

Losses count too. If you sell crypto for less than your cost basis, that capital loss first offsets your capital gains for the year. If your losses exceed your gains, you can deduct up to $3,000 of the excess against your ordinary income each year ($1,500 if married filing separately), and carry any remaining loss forward to future years.

When Crypto Counts as Income, Not a Capital Gain

Not every crypto transaction is a capital gain or loss. If you receive crypto as payment for goods or services, earn it through mining or staking, or receive it via an airdrop, the IRS treats that as ordinary income, valued at fair market value on the date you received it. That income is taxable up front, and it also becomes your cost basis for any future sale of that same crypto.

Reporting: Form 8949, Schedule D, and the New 1099-DA

Every disposal gets reported on Form 8949, which feeds into Schedule D of your Form 1040. Ordinary income from mining, staking, or payments generally goes on Schedule 1 or Schedule C, depending on whether it rises to the level of a trade or business. Form 1040 also asks every filer a yes-or-no question about whether they received, sold, exchanged, or otherwise disposed of digital assets during the year, so answer it carefully.

Crypto reporting has also changed significantly. Starting with transactions on or after January 1, 2025, centralized U.S. crypto exchanges must report your gross proceeds directly to the IRS on a new form, Form 1099-DA, similar to how a brokerage reports stock trades on a 1099-B. The first of these forms, covering 2025 activity, arrived in early 2026. For 2025 transactions, exchanges weren’t required to report cost basis, which meant investors often had to calculate and substantiate it themselves.

Starting with 2026 sales, exchanges must also report cost basis, but only for crypto bought on or after January 1, 2026, and held at that same exchange until it was sold. Coins you bought before 2026, or transferred in from another exchange or a self-custody wallet, generally won’t have basis reported, so you’ll need to supply it yourself. A blank cost-basis box doesn’t mean your basis is zero; it means the IRS is relying on you to report it correctly. The bottom line: don’t assume your exchange’s 1099-DA will be complete or accurate. Keep your own transaction records as a backup.

Cost-Basis Tracking Got More Complicated in 2025

Under IRS Revenue Procedure 2024-28 and the accompanying final regulations, investors are no longer allowed to use a single “universal” cost-basis pool across every wallet and exchange account. As of January 1, 2025, cost basis must be tracked on a per-wallet, per-account basis. Investors were given a one-time safe harbor to allocate their existing basis across wallets, which generally had to be completed by January 1, 2025. If you didn’t do this allocation, it’s worth talking to a tax professional about your options going forward, since misallocated basis can complicate future filings.

A Quirk Worth Knowing: No Wash Sale Rule (Yet)

Unlike stocks, crypto isn’t currently subject to the wash sale rule, which normally disallows a tax loss if you buy back a “substantially identical” security within 30 days. Because crypto is property rather than a security, investors can sell a losing position, claim the loss, and immediately repurchase the same coin. Congress has proposed closing this loophole multiple times since 2021, and several bills to do so are pending in 2026, but as of this writing it remains open. Spot Bitcoin ETFs are a different story: because their shares trade as securities, most tax advisors assume the wash sale rule does apply to them, though the IRS hasn’t issued formal guidance on the question.

The Practical Takeaway

Crypto taxation has gotten more structured, not simpler. Between per-wallet cost basis rules and the phase-in of Form 1099-DA, good record-keeping matters more than ever. Track every acquisition date, cost basis, and disposal across every wallet and exchange you use, and don’t rely solely on exchange-issued forms to be complete.  Coin IRA’s Non-IRA account holders receive form 1099-DA from their custodian, Equity Trust, easing the record-keeping burden. But holding crypto in an IRA alleviates the annual reporting burden completely, because it shields you from the annual reporting requirement, and only generates a 1099 when you take a distribution.  Have questions?  Call Coin IRA at 888-998-COIN.

This article is for general informational purposes only and isn’t tax or legal advice. Crypto tax rules are complex and continue to evolve; consult a qualified tax professional about your specific situation.