Crypto Tax & Profit/Loss Estimator

Crypto Taxes Explained: The Complete 2026 Guide

For many investors, the decentralized nature of cryptocurrency creates a false sense of security regarding taxes. However, in the eyes of the IRS and many global tax authorities, cryptocurrency is treated as property, not currency. This distinction has massive implications for your tax bill.

Every time you sell crypto for fiat (USD), trade one coin for another (e.g., BTC for ETH), or use crypto to purchase goods or services, you trigger a taxable event. You must calculate your capital gain or loss on every single transaction.

Accounting Methods: FIFO vs. LIFO vs. HIFO

When you have multiple purchases of Bitcoin at different prices, which "coin" are you selling? The IRS allows different accounting methods, but you must be consistent.

• FIFO (First-In, First-Out): Assumes you sell your oldest coins first. In a bull market, your oldest coins often have the lowest cost basis, leading to the highest tax bill, but they are also most likely to qualify for long-term rates.
• LIFO (Last-In, First-Out): Assumes you sell your most recently acquired coins first. This often results in a lower tax bill if you bought high recently, but these are usually short-term gains.
• HIFO (Highest-In, First-Out): Specifically sells the coins with the highest cost basis to minimize gains (or maximize losses). This is the most tax-efficient method but requires detailed record-keeping.

Income Events vs. Capital Gains

Not all crypto activity is a capital gain. Some activities are treated as Ordinary Income based on the fair market value of the coin at the time of receipt:

Tax Loss Harvesting

If you have coins that are down in value, you can sell them to realize a capital loss. This loss can be used to offset your capital gains from other winning trades, lowering your overall tax bill. If your losses exceed your gains, you can deduct up to $3,000 against your ordinary income per year, carrying forward any remaining losses to future years.