With regulators treating cryptocurrencies as property rather than currency in many jurisdictions, buying, selling and using digital assets can create taxable events. The first step is to track every transaction: purchases, sales, trades between coins, mining rewards, staking income and spending crypto on goods or services. Many exchanges provide downloadable histories, and portfolio management tools like CoinTracking or Koinly can help aggregate data across platforms.
Next, calculate your capital gains or losses. For each sale or trade, subtract your cost basis (what you paid for the asset plus any fees) from the proceeds you received. If you held the asset for more than one year, you may qualify for long‑term capital gains rates, which are often lower than short‑term rates. Income from mining, staking or airdrops is usually treated as ordinary income at the fair market value when received, and becomes part of your cost basis when you eventually sell.
Report your results on the appropriate forms for your country: in the U.S., this means Form 8949 and Schedule D for capital gains and Form 1099‑MISC for miscellaneous income. Consult a tax professional for specifics, especially if you have complex transactions like margin trading or DeFi activity. Keep detailed records and receipts in case of an audit, and set aside funds throughout the year to cover your tax bill—surprises are common if you’re not prepared.