By Team SalaryCalculate · 9/4/2025
Crypto can create two kinds of tax exposure: income and capital gains. Income generally covers rewards you receive (like staking, mining, or airdrops) at their fair market value when you get them. Capital gains cover profit or loss when you dispose of assets later by selling, swapping, or spending.
The catch is timing: income can be taxable today, while gains are taxable only when you dispose. That timing difference affects cash flow, records you need, and the total tax you eventually pay.
Quick classification table
| Activity | Typical Tax Type | Taxed When | Notes |
|---|---|---|---|
| Staking rewards | Income | On receipt | Value at receipt becomes cost basis for later disposal |
| Validator/mev rewards | Income | On receipt | Similar to staking; net after fees may apply |
| Mining rewards | Income | On receipt | FMV at receipt; expenses may be deductible where allowed |
| Airdrops | Income | On receipt | Often income even if unsolicited; confirm local rules |
| Interest/yield from lending | Income | On receipt | Accrued or paid; depends on protocol/accounting |
| Selling/swapping coins | Capital gains | On disposal | Proceeds minus cost basis (FIFO/LIFO/specific id) |
| Paying with crypto | Capital gains | On payment | Spending is a disposal event in many jurisdictions |
Worked examples
1) Income first, capital gains later
| Step | Event | FMV / Cost | Tax Impact |
|---|---|---|---|
| A | You receive 1.0 ETH in staking rewards | $3,000 FMV | Income of $3,000 at receipt |
| B | You later sell that 1.0 ETH for cash | $3,500 proceeds | Capital gain $500 ($3,500 − $3,000) |
2) Pure capital gains (no income)
| Step | Event | FMV / Cost | Tax Impact |
|---|---|---|---|
| A | You buy 1.0 BTC | $20,000 cost | No tax on purchase |
| B | You sell 1.0 BTC later | $27,000 proceeds | Capital gain $7,000 (minus fees) |
Recordkeeping you actually need
Keep per-lot details: date/time, quantity, fees, fair market value, and wallet/exchange. Track income and disposals separately. Good records make it easier to calculate cost basis and match lots consistently.
To model tax quickly before you act, try our crypto tax calculator for scenarios that combine income and capital gains.
Staking, mining, and airdrops: why they’re usually income
These rewards are new value you receive, so most tax systems treat them as income at fair market value. That amount becomes your cost basis if you later dispose of the tokens. Expenses (like mining electricity) may be deductible where allowed.
If you focus on airdrops, model the timing with our crypto airdrop tax calculator to estimate income at receipt and gains or losses later.
Mining is similar: rewards are usually income at FMV when credited. Hardware, electricity, and pool fees can change net income. Use the crypto mining tax calculator to test profitability after taxes and costs.
Disposals and capital gains: how the math works
| Component | Description |
|---|---|
| Proceeds | What you received on sale/swap/spend (after applicable fees) |
| Cost basis | What you paid (or FMV at receipt for income-derived tokens) |
| Gain/Loss | Proceeds − Cost basis (short/long term per holding period) |
| Lot method | FIFO/LIFO/specific identification rules for choosing which lots you disposed |
Holding period matters: many systems tax long-term gains at different rates than short-term. Keep timestamps precise, especially if you rebalance frequently or move assets between wallets.
Jurisdiction notes and references
Rules vary by country and can change. See current guidance such as the IRS virtual currency pages and HMRC cryptoassets manuals for definitions, filing, and recordkeeping expectations.
United States (IRS) | United Kingdom (HMRC)
FAQs
Is staking always income?
Most systems treat staking rewards as income at receipt, but details differ (e.g., accrual vs crediting). Confirm local rules and how your platform timestamps rewards.
Can I offset income with later capital losses?
Often you can offset gains with losses and, in some places, offset limited amounts of ordinary income—subject to caps and carryover rules. Check local limits and forms.
What’s the best accounting method for me?
It depends on your activity and goals. Some prefer specific identification to optimize lots; others stick with FIFO. What matters is consistency, documentation, and compliance in your jurisdiction.
Bottom line
Income from staking, mining, and airdrops is usually taxed at receipt; capital gains are taxed when you dispose. Track both cleanly, model scenarios before transacting, and use tools to avoid surprises at filing time.