Cryptocurrency and NFT Tax Guide for Small Businesses

Q: Do I need to report cryptocurrency held on a foreign exchange?

Yes. If you hold cryptocurrency on a foreign exchange (Binance, Kraken for non-US accounts, or any exchange headquartered outside the United States) and the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the year, you must file an FBAR (FinCEN Form 114). The IRS and FinCEN have taken the position that foreign crypto exchange accounts are reportable foreign financial accounts. FBAR penalties are severe: up to $16,536 per report for non-willful violations (per report, not per account, after Bittner v.

Q: What is the tax treatment of staking rewards and mining income?

Staking rewards and mining income are taxable as ordinary income at fair market value on the date received (Revenue Ruling 2023-14). For miners, this is also subject to self-employment tax if mining constitutes a trade or business. The cost of mining equipment is a deductible business expense (Section 179 or depreciation), and electricity costs are deductible against mining income. When you later sell the staked or mined tokens, you recognize capital gain or loss based on the difference between the sale price and your basis (the fair market value at which you originally recognized income).

Q: How are cryptocurrency staking rewards and airdrops taxed?

Staking rewards are taxed as ordinary income at fair market value when you receive them, based on IRS Revenue Ruling 2023-14, which treats staking rewards as income upon receipt regardless of whether you sell them. Airdrops are also taxable as ordinary income at the time you gain dominion and control over the tokens, valued at fair market value on the date of receipt. Your cost basis in staking rewards and airdropped tokens equals the fair market value you reported as income, so if you later sell them, you only pay capital gains tax on any appreciation above that basis.

By Yarik Yarosh, CPA ·September 5, 2026 ·6 min read

Written by Yarik Yarosh, CPA (US & Canada) September 5, 2026 · FL CPA license AC61704 · CPA Ontario

Small businesses that accept cryptocurrency as payment, pay employees or contractors in crypto, or hold crypto as a business investment face specific tax rules that are often misunderstood. The IRS treats cryptocurrency as property (not currency), which means every transaction involving crypto is a potentially taxable event. There is no de minimis exception, no “I’m holding it so it’s not taxable” rule, and no exemption for converting between different cryptocurrencies.

✓Key takeaway

Cryptocurrency tax rules for businesses:

Receiving crypto as payment. When a customer pays in Bitcoin, Ethereum, or any other cryptocurrency, the business recognizes ordinary income equal to the fair market value (FMV) of the crypto at the time of receipt. This is reported as gross receipts on the business return (Schedule C, Form 1120-S, etc.). The business’s basis in the received crypto is the FMV at the time of receipt.
Selling or exchanging crypto. When the business sells crypto (for USD or another crypto), the difference between the sale price and the basis is a capital gain or loss. If held more than 1 year: long-term capital gain (0%, 15%, or 20% + 3.8% NIIT). If held 1 year or less: short-term capital gain (taxed as ordinary income).
Paying employees in crypto. The wages are reported at FMV on the pay date. The business must withhold income tax and FICA based on the FMV. The employee receives a W-2 showing the dollar equivalent. The business gets a deduction for the FMV.
Paying contractors in crypto. Report FMV on Form 1099-NEC. The contractor recognizes ordinary income.
Mining or staking rewards. If the business mines cryptocurrency or receives staking rewards, the rewards are ordinary income at FMV when received (Rev. Rul. 2023-14). The basis is FMV at receipt. The cost of mining equipment, electricity, and internet is deductible as a business expense.
NFTs. Non-fungible tokens are treated as property. For creators (artists, businesses that mint NFTs for sale), the revenue is ordinary business income. For purchasers, selling an NFT triggers capital gain or loss. The IRS has proposed (Notice 2023-27) that NFTs that are “collectibles” are taxed at the 28% collectibles rate for long-term gains, rather than the standard 20% rate. Whether an NFT is a “collectible” depends on the underlying asset it represents.
Reporting. Form 8949 and Schedule D for capital gains/losses. Business income on the applicable business return. Starting in 2025, brokers and exchanges report crypto transactions on Form 1099-DA (IRC 6045 as amended by the Infrastructure Investment and Jobs Act).
Record-keeping. Track every transaction: date, type (buy, sell, exchange, receive as payment), amount of crypto, FMV in USD at the time, and counterparty. Crypto tax software (CoinTracker, Koinly, TaxBit) can automate this for businesses with high transaction volumes.

How does crypto acceptance work for a small business?

Hypothetical example

Round numbers. A web development S-Corp accepts Bitcoin for some client projects. During the year:

Transaction 1: Received 0.5 BTC as payment for a $20,000 web project.

FMV at receipt: $20,000
Report as gross receipts: $20,000 (ordinary income)
Basis in 0.5 BTC: $20,000

Transaction 2: Three months later, sold 0.5 BTC for $25,000.

Sale price: $25,000
Basis: $20,000
Short-term capital gain (held < 1 year): $5,000
Tax on gain (32% bracket): $1,600

Transaction 3: Received 0.3 BTC as payment for a $12,000 project.

FMV at receipt: $12,000
Report as gross receipts: $12,000
Basis: $12,000

Transaction 4: Still holding 0.3 BTC at year end. BTC has dropped to $30,000 (from $40,000 at receipt).

No taxable event. Unrealized losses are not deductible.
Basis remains $12,000
If sold next year for $9,000: $3,000 capital loss (deductible against other gains, or $3,000/year against ordinary income)

Year-end summary:

Business income from crypto payments: $32,000 (reported as gross receipts)
Capital gain from crypto sale: $5,000 (reported on Form 8949)
Total additional taxable income: $37,000

Common mistakes:

Not reporting crypto received as payment (the IRS matches 1099-K from exchanges and sees the business address receiving crypto)
Not tracking basis (using FIFO, LIFO, or specific identification consistently)
Not recognizing that exchanging BTC for ETH is a taxable event (it is a sale of BTC and a purchase of ETH)
Deducting unrealized losses on crypto still held

Illustrative numbers only, not a real client and not advice for your facts.

Do I need to report cryptocurrency held on a foreign exchange?

Yes. If you hold cryptocurrency on a foreign exchange (Binance, Kraken for non-US accounts, or any exchange headquartered outside the United States) and the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the year, you must file an FBAR (FinCEN Form 114). The IRS and FinCEN have taken the position that foreign crypto exchange accounts are reportable foreign financial accounts. FBAR penalties are severe: up to $16,536 per report for non-willful violations (per report, not per account, after Bittner v. United States), and the greater of $165,353 or 50% of the account balance for willful violations. Additionally, taxpayers with foreign financial assets above $50,000 (single) or $100,000 (MFJ) at year-end may need to file Form 8938 (FATCA). The threshold question is where the exchange is domiciled, not where you are located.

What is the tax treatment of staking rewards and mining income?

Staking rewards and mining income are taxable as ordinary income at fair market value on the date received (Revenue Ruling 2023-14). For miners, this is also subject to self-employment tax if mining constitutes a trade or business. The cost of mining equipment is a deductible business expense (Section 179 or depreciation), and electricity costs are deductible against mining income. When you later sell the staked or mined tokens, you recognize capital gain or loss based on the difference between the sale price and your basis (the fair market value at which you originally recognized income). The holding period for capital gains starts on the date the tokens are received into your wallet.

Related guides:

Cryptocurrency Tax Rules for Small Businesses
Cryptocurrency Tax Obligations for Small Business Owners
Cryptocurrency Tax for Cross-Border Canadians and Americans: How Both Countri…

How are cryptocurrency staking rewards and airdrops taxed?

Staking rewards are taxed as ordinary income at fair market value when you receive them, based on IRS Revenue Ruling 2023-14, which treats staking rewards as income upon receipt regardless of whether you sell them. Airdrops are also taxable as ordinary income at the time you gain dominion and control over the tokens, valued at fair market value on the date of receipt. Your cost basis in staking rewards and airdropped tokens equals the fair market value you reported as income, so if you later sell them, you only pay capital gains tax on any appreciation above that basis. Tracking cost basis across multiple wallets, exchanges, and DeFi protocols requires dedicated crypto tax software because the IRS expects specific identification or FIFO lot tracking for every disposition.

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Cite this page

Yarik Yarosh, CPA. "Cryptocurrency and NFT Tax Guide for Small Businesses." Blue Cloud CPA, September 5, 2026. https://bluecloudcpa.com/guides/small-business-crypto-nft-tax-guide

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.