US crypto taxation

Definition

US federal tax treats crypto as PROPERTY, not currency (IRS Notice 2014-21) — the single fact from which the regime’s surprises follow: nearly every disposition is a taxable event (selling for dollars, swapping coin-for-coin, SPENDING crypto on goods), each requiring gain/loss computation against basis; and because the wash-sale rule by statute covers “stock or securities” (IRC §1091), it has NOT applied to directly-held crypto under current law — loss-harvesting mechanics that are constrained in equities (acct-wash-sale) operate differently here, a repeatedly-proposed legislative target that remains unchanged as of this entry’s writing (dated claim — verify at use). Facts only, never advice: tax treatment is individual-circumstance-dependent and this entry describes the map, not what anyone should do.

How it works / structure

• Taxable events: disposals trigger capital gain/loss (sale, exchange between crypto assets, payment for goods/services); holding-period rules split short/long-term as with other capital assets. Receipt of crypto as income (compensation, mining/staking rewards) is ordinary income at receipt-date fair value; hard forks and airdrops create income when the taxpayer gains dominion (Rev. Rul. 2019-24).
• Basis tracking: property treatment means per-lot basis and disposition matching across wallets and venues — the bookkeeping burden scales with transfer activity (crypto-transfer-settlement), and transfers between one’s own wallets are NOT dispositions (recordkeeping still must prove it).
• Wash-sale non-application: §1091’s text covers stock or securities; the IRS has not extended it to directly-held crypto property — while ETP SHARES are securities, so wrapper-held crypto exposure follows securities rules (crypto-etps, acct-wash-sale) — one of several places where wrapper choice changes tax character.
• Futures channel: CME crypto futures are Section 1256 contracts — 60/40 treatment and year-end mark-to-market (acct-section-1256, crypto-cme-futures) — a categorically different regime from property-disposal accounting.
• Broker reporting era: digital-asset broker reporting (Form 1099-DA, per the IRS digital-assets guidance hub) phases in custodial-broker basis reporting — the self-reported era is closing; venue records and personal basis tracking must reconcile.

When it applies

After-tax strategy comparison (the wrapper decision — direct coin vs ETP vs futures — changes the tax regime attached to the same market exposure), turnover-sensitive strategy design (every rebalance and coin-swap is a realization event in the direct channel), and year-end planning windows where realized gain/loss management interacts with the rules above — always as analytical framing; execution decisions belong with a tax professional.

Risk profile & failure modes

• Spending surprise: using crypto as money creates dispositions — small-payment activity generates dense taxable-event streams participants rarely track.
• Basis chaos: multi-venue, multi-wallet activity without contemporaneous records makes accurate reporting reconstruction expensive; venue failure can destroy records exactly when needed (crypto-loss-modes).
• Rule-change exposure: wash-sale extension to digital assets has been proposed in multiple budgets; strategies premised on current non-application carry legislative risk (crypto-regulation-us).
• Cross-regime confusion: mixing property-channel, securities-channel (ETP), and 1256-channel (futures) positions in one strategy without separating their tax mechanics misprices after-tax expectancy.

Evidence & limits

Core treatment is primary-source IRS guidance (Notice 2014-21; Rev. Rul. 2019-24; the digital-assets hub for the evolving reporting rules). State tax, international reporting, and entity-structure questions are out of scope. Everything here is descriptive tax law summary with a date attached — not advice, and stale the day the next statute or ruling lands.

Falsifiable-thesis examples

Illustrations only, not signals:

• “Wash-sale coverage is extended to digital assets by statute within the next two Congresses (harmonization thesis)” — falsified by the sessions ending without enactment.
• “Direct-coin and ETP-wrapper holders of the same exposure realize materially different after-tax returns over a full harvest cycle under current rules (wrapper-tax-effect thesis)” — falsified by the modeled comparison with pinned assumptions.

Cross-references

• The securities-side rules for contrast: acct-wash-sale, acct-assignment-tax; the futures channel: acct-section-1256
• The wrappers that switch regimes: crypto-etps, crypto-cme-futures
• The moving landscape: crypto-regulation-us