Do You Pay Taxes on Crypto You Haven’t Sold?
The IRS has specific rules about when a crypto profit actually becomes taxable, and many holders get it wrong in both directions, either paying taxes they don't owe or skipping taxes they do.
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Bitcoin (CRYPTO:BTC) holders who experienced a 31% gain in 90 days without selling typically don’t owe any crypto tax on those profits yet. Bitcoin climbed from around $64,083 on July 24, 2026, to about $84,185 on October 22, and many investors watched their balances grow without ever hitting the sell button.
But then they hear the IRS might want a cut of those paper profits, gains that exist only on their screens until they sell. So, do you have to pay taxes on crypto you haven’t sold?
The IRS Generally Doesn’t Tax Crypto Until You Sell
In most cases, the answer is no. IRS Publication 550 says, “The general tax principles that apply to property transactions apply to transactions using digital assets.” This means the IRS treats cryptocurrencies as property, so you usually don’t get a tax bill until you sell or otherwise dispose of them.
The Form 1040 instructions go a step further, listing actions that generally don’t require you to answer “Yes” to the digital asset question on your tax return. This includes holding a digital asset in a wallet, moving coins between wallets you own, or using U.S. dollars to buy crypto through services like PayPal and Venmo.
Who This Crypto Tax Rule Applies To
| Situation | Detail |
|---|---|
| Who it fits | Anyone who bought crypto with dollars and continues to hold it |
| Price swings | Bitcoin is down 22% over the past year but up 31% in the last 90 days |
| Core question | Does a rising or falling balance create a tax bill? |
| Short answer | Generally no, until a holder sells, swaps, spends or earns new coins |
Get your crypto tax situation right, because mistakes can cost you. Some holders might sell early to cover taxes they don’t owe, unnecessarily reducing their investment. Others might think the IRS can’t track a coin swap and skip reporting a taxable gain, which could lead to trouble down the road.
Selling, Swapping, Spending and Staking Trigger a Crypto Tax Bill
Your tax responsibility depends on how you use the coins. Price changes alone don’t create a taxable event. The Form 1040 instructions list taxable triggers as selling, trading one digital asset for another, disposing of coins for property or services, and earning new digital assets from mining, staking, and similar activities.
For example, if you bought one Bitcoin for about $64,083 in July 2026, you’d have a paper profit of around $20,100 by late October. However, if you swap that Bitcoin for Ethereum (CRYPTO:ETH), the IRS treats that swap as a sale, triggering a tax bill even if no cash reaches your account.
A purchase made with crypto also counts as a sale. If you buy a laptop with Bitcoin, you’re essentially disposing of that Bitcoin in exchange for property. Staking rewards are treated as income, and you’ll need to report those on Schedule 1, line 8v, for digital asset income not captured elsewhere.
The same rules apply to losses. If you bought one Bitcoin for about $107,586 in October 2025 and its value has dropped by about $23,400, you can only claim that loss after selling.
Your Options for Handling Crypto Tax in 2026
If you continue holding your coins, you owe no tax yet and have minimal paperwork. However, you remain exposed to price fluctuations—Ethereum, for example, has dropped 35% over the past year. This strategy suits long-term investors who don’t need immediate cash.
Selling locks in a taxable gain or loss, and how long you’ve held the asset affects your tax rate. Under federal law (26 U.S.C. § 1222), gains on assets held for a year or less are considered short-term and taxed at ordinary income rates, whereas long-term gains are taxed at lower rates.
Every time you spend or stake crypto, you create a separate taxable event, so a dozen purchases or rewards can mean a dozen gains to track. Without proper records, this can get complicated and isn’t the best strategy for most investors.
Fortunately, brokers now help with sales. Publication 544 says brokers must provide a Form 1099-DA showing gross proceeds from each digital asset sale they managed for a customer in 2025. This form aids in filling out Form 8949 and Schedule D for your tax return. However, it may only provide the sale price, not the purchase cost, so you’ll need to keep accurate records.
Do You Owe Crypto Tax on Coins You Haven’t Sold?
Generally, no. The IRS only taxes crypto when you sell, swap, spend, or earn new coins—not when the market value rises. So, if you hold Bitcoin with a 31% paper gain since July, you won’t owe any tax until you sell or swap.
With that in mind, keep detailed records of what you paid for each purchase, transfer, and reward. This will help you establish the cost basis the IRS uses to evaluate each gain. Given how crypto prices fluctuate—as we saw with Bitcoin in 2026—those records could significantly affect how much tax you owe on your next sale.
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Sam Daodu is a crypto analyst who's spent nearly a decade making blockchain understandable—no easy task when most whitepapers read like fever dreams. He writes for 24/7 Wall St., covering Bitcoin, altcoins, and crypto market analysis for investors. Before crypto, he was a tech writer (back when explaining "the cloud" was peak innovation). Since 2018, he's written for CoinTelegraph, Yahoo Finance, The Block, Cryptonews, Zypto, Rain, and more—basically anywhere people want crypto news without the headache. Sam runs MacLabs Marketing, a content agency for crypto brands tired of sounding like AI wrote their website. He also publishes free crypto education on his site for Web3 enthusiasts who think "gas fees" is a typo. When he's not writing or staring at charts, Sam's either: - Watching anime (currently convinced One Piece has better tokenomics than most altcoins) - At the gym sculpting himself into a Greek god - Listening to the music your mum warned you only bad boys listen to Connect: LinkedIn | Email | MacLabs Marketing
