Cryptocurrency Tax Rules for Businesses: Accepting Bitcoin, Reporting, and Capital Gains

By Yarik Yarosh, CPA ·September 5, 2026 ·7 min read

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

The IRS treats cryptocurrency as property, not currency, under Notice 2014-21. This classification means that general tax principles applying to property transactions apply to cryptocurrency. Every disposition (sale, exchange, trade, or spending crypto to buy something) is a taxable event that must be reported. For a business that accepts crypto as payment, mines crypto, or pays workers in crypto, the tax obligations are significant and the record-keeping requirements are substantial. The IRS has made digital asset enforcement a priority, adding the digital asset question to the front of Form 1040 and expanding broker reporting requirements under the Infrastructure Investment and Jobs Act. Starting in 2026 (for 2025 transactions), cryptocurrency exchanges will be required to issue Form 1099-DA to report gross proceeds and, in some cases, cost basis.

✓Key takeaway

Taxable events involving cryptocurrency:

Event	Tax Treatment	Reporting
Receiving crypto as payment for goods/services	Ordinary income at FMV on date received	Schedule C (self-employed) or Form 1120/1120-S (corp)
Selling crypto for cash	Capital gain/loss (FMV at sale minus basis)	Form 8949 + Schedule D
Trading one crypto for another (e.g., BTC to ETH)	Capital gain/loss (FMV of crypto received minus basis of crypto given up)	Form 8949 + Schedule D
Spending crypto to buy goods/services	Capital gain/loss (FMV of goods received minus basis of crypto spent)	Form 8949 + Schedule D
Mining crypto	Ordinary income at FMV when mined + SE tax	Schedule C
Staking rewards	Ordinary income at FMV when received	Schedule C (if trade/business) or other income
Airdrops	Ordinary income at FMV when received (if dominion and control)	Other income
Hard forks (with new coins received)	Ordinary income at FMV when new coins are received	Other income
Receiving crypto as gift	Not taxable until sold; recipient takes donor’s basis	Form 8949 on eventual sale
Donating crypto to charity	Deduction at FMV if held over 1 year (no capital gains tax)	Schedule A or entity deduction

NOT taxable events:

Event	Why Not Taxable
Buying crypto with cash	No gain or loss (establishing basis)
Transferring crypto between your own wallets	No change in ownership
Holding crypto (unrealized gains)	Not taxable until sold/exchanged
Gifting crypto (for the giver, within gift tax limits)	Gift tax rules apply; no income tax event for giver

How does crypto tax work for businesses?

Hypothetical example

Round numbers. A consulting business accepts Bitcoin as payment and also holds some Bitcoin as a business investment.

Transactions during 2025:

Date	Transaction	BTC Amount	FMV per BTC	Total FMV
Jan 15	Received BTC for consulting services	0.5 BTC	$40,000	$20,000
Mar 10	Purchased BTC with business funds	1.0 BTC	$45,000	$45,000
Jun 20	Received BTC for consulting services	0.3 BTC	$50,000	$15,000
Aug 5	Sold 0.5 BTC (the Jan 15 batch)	0.5 BTC	$55,000	$27,500
Oct 1	Paid contractor in BTC	0.2 BTC (from Mar 10 batch)	$60,000	$12,000
Dec 15	Traded 0.3 BTC (Jun 20 batch) for ETH	0.3 BTC	$65,000	$19,500

Income recognition:

Event	Income Type	Amount	Reporting
Jan 15: Received 0.5 BTC for services	Ordinary income	$20,000	Schedule C revenue
Jun 20: Received 0.3 BTC for services	Ordinary income	$15,000	Schedule C revenue
Total ordinary income from crypto		$35,000

Capital gains/losses on dispositions:

Disposition	Proceeds (FMV at sale)	Basis (FMV when acquired)	Gain/Loss	Holding Period	Type
Aug 5: Sold 0.5 BTC (acquired Jan 15)	$27,500	$20,000	$7,500 gain	~7 months	Short-term
Oct 1: Paid contractor 0.2 BTC (acquired Mar 10)	$12,000	$9,000 (0.2/1.0 x $45,000)	$3,000 gain	~7 months	Short-term
Dec 15: Traded 0.3 BTC for ETH (acquired Jun 20)	$19,500	$15,000	$4,500 gain	~6 months	Short-term

Total capital gains	Amount
Short-term capital gains	$15,000
Long-term capital gains	$0

Tax on crypto activity:

Item	Amount	Tax Rate	Tax
Ordinary income (crypto received for services)	$35,000	37% (assumed bracket)	$12,950
SE tax on $35,000	$35,000 x 15.3% x 92.35%		$4,947
Short-term capital gains	$15,000	37%	$5,550
Total federal tax from crypto			$23,447

Contractor payment reporting: The 0.2 BTC paid to the contractor on Oct 1 (FMV = $12,000) must be:

Reported on Form 1099-NEC to the contractor (FMV = $12,000)
The payment is a deductible business expense ($12,000)
The $3,000 gain on the BTC disposition is separately reported on Form 8949

Employee payment (if paying employees in crypto):

Requirement	Details
Withholding	Federal income tax, FICA, state tax must be withheld based on FMV
W-2 reporting	FMV on date of payment reported as wages
Payroll deposit	Withholding must be deposited in U.S. dollars (not crypto)
FLSA compliance	Federal minimum wage and overtime must be paid in U.S. dollars; crypto can supplement but not replace

Record-keeping requirements:

Record	What to Track
Date of acquisition	When you received or purchased the crypto
Cost basis	FMV at time of acquisition (or purchase price)
Date of disposition	When you sold, traded, or spent the crypto
Fair market value at disposition	Price at the time of sale/exchange/spending
Identification method	Specific identification (recommended) or FIFO
Wallet addresses	Which wallets held which lots
Exchange records	Trade confirmations, transaction IDs

Cost basis methods:

Method	How It Works	Best For
Specific identification	You designate which lot is being sold/spent	Maximizing or minimizing gains (most control)
FIFO (First-In, First-Out)	Oldest crypto is treated as sold first	Default if specific ID not used; may result in long-term treatment for older holdings
LIFO (Last-In, First-Out)	Not specifically authorized for crypto	Consult your CPA
Average cost	Now available for crypto (starting 2025)	Simplicity; similar to mutual fund reporting

Charitable donation of crypto (tax-efficient):

Scenario	Deduction	Capital Gains Tax
Sell BTC, donate cash	Deduction = sale proceeds; pay capital gains on sale	Yes (taxable sale)
Donate BTC directly (held over 1 year)	Deduction = FMV (up to 30% AGI)	No (no capital gains tax)

Example: Owner donates 0.5 BTC with $30,000 FMV and $10,000 basis:

Method	Deduction	Tax Saved on Deduction (37%)	Capital Gains Tax Avoided	Net Benefit
Sell + donate cash	$30,000	$11,100	($3,000) at 20% LTCG	$8,100
Donate directly	$30,000	$11,100	$0	$11,100
Additional benefit of direct donation				$3,000

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

Want this checked against your own situation?

Start with a Diagnostic: a CPA licensed in the US and Canada reads your file and answers in writing, three to four business days after you finish the questions. $250 for cross-border, $195 for a second opinion on a filed return, and it comes straight off the bill if we do the work after. Or book a free 15-minute fit call first.

Start a Diagnostic →Book a free call

Get the next cross-border guide by email

One or two plain-English guides a week on US-Canada tax. No spam, unsubscribe anytime.

Cite this page

Yarik Yarosh, CPA. "Cryptocurrency Tax Rules for Businesses: Accepting Bitcoin, Reporting, and Capital Gains." Blue Cloud CPA, September 5, 2026. https://bluecloudcpa.com/guides/small-business-cryptocurrency-bitcoin-tax-rules-reporting

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