In the United States, the single fact that shapes every other rule is that crypto is treated as property, not currency. That one classification means there is no de minimis spending exemption, every disposal is a capital event measured against a cost basis, and even a crypto-to-crypto swap — trading one token for another, never touching dollars — is a taxable disposal of the token given up. A holder who has never cashed out to a bank can still owe capital gains tax.
Property, not currency — and what follows from it
Because crypto is property, the familiar mechanics of capital gains apply in full. A disposal is any event that parts the holder from the asset: selling to fiat, swapping one token for another, or spending crypto on goods. Each disposal compares proceeds against the basis of the specific units given up, and the difference is a capital gain or loss.
The holding period then sets the rate, and the twelve-month line is the most consequential date in the US system:
- Short-term — units held twelve months or less are taxed at ordinary income rates, the same schedule that applies to wages.
- Long-term — units held longer than twelve months qualify for the preferential 0, 15, or 20 percent long-term capital-gains rates.
The gap between an ordinary rate and a 15 percent long-term rate is large enough that, for many holders, when a lot was acquired matters as much as what it cost. Crossing the one-year line on a lot can change its effective tax by more than half.
FIFO by default, specific identification by record-keeping
The default cost-basis method in the US is FIFO — first in, first out — so absent any election the oldest lot is disposed of first. But the rules also permit specific identification: a holder who keeps lot-level records of acquisition date, basis, and disposal may choose which units are sold.
That permission is what unlocks the optimising methods:
- HIFO (highest in, first out) disposes of the highest-basis lots first, minimising the gain reported in the period.
- LIFO (last in, first out) disposes of the most recently acquired lots.
Neither is available without the records to back it up. Specific identification is a documentation standard, not a checkbox — the burden is on the taxpayer to show which lot was sold. HQ Wealth defaults to FIFO and supports specific identification, holding each acquisition as its own lot so a holder running HIFO sees the highest-basis units selected automatically rather than reconstructed at year end.
Income events: staking and airdrops at receipt
Not every crypto event is a capital event. Some are ordinary income the moment the tokens arrive, valued at fair market value on the date the holder gains control:
- Staking rewards are income at receipt under Rev. Rul. 2023-14, included in gross income in the year dominion and control passes. That receipt value also becomes the basis for the later capital-gains calculation.
- Airdrops are income at receipt under Rev. Rul. 2019-24, valued when they land in a wallet the recipient controls.
The figure recorded at receipt does double duty: it is the income amount now and the cost basis later. Record it inconsistently and the books fail to reconcile across the two events.
The wash-sale question — a live grey area
The wash-sale rule in IRC section 1091 disallows a loss when a taxpayer sells a security at a loss and buys a substantially identical one within thirty days. The rule is written to reach stock or securities.
Crypto is property, not stock or securities, so as the rules stand today the wash-sale rule does not apply to crypto. A holder can sell a token at a loss, realise that loss to offset gains, and rebuy the same token immediately without the loss being disallowed — a planning advantage equity holders do not have. The honest caveat is that this is a legislative grey area, not a settled principle: bills have repeatedly targeted exactly this gap, and the treatment could change. It is worth confirming the current position with a professional before relying on it for a material amount.
Filing: the forms and the calendar
The capital-gains detail lands on Form 8949, which feeds Schedule D. Interest and dividend income — including qualified dividends, taxed at the same preferential long-term rates — are reported on Schedule B. Tax-advantaged accounts such as a 401(k), Roth IRA, Traditional IRA, or HSA shelter gains under their own rules. The federal filing deadline is April 15.
HQ Wealth encodes this method end to end: property treatment for disposals, the twelve-month holding-period split, FIFO with specific-identification support, and income recognised at receipt for staking and airdrops — then produces Form 8949-style capital-gains line data in a US tax pack, so the figures on the form trace back to specific lots rather than a derived average.
Takeaway: US crypto tax follows from one fact — it is property — so every swap is a disposal, the twelve-month line sets the rate, and FIFO is the default until lot-level records unlock HIFO or LIFO. The wash-sale rule does not reach crypto as the rules stand today, but treat that as a grey area worth a professional's confirmation.