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

By Yarik Yarosh, CPA ·September 5, 2026 ·9 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. For current guidance, see IRS digital assets guidance. 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.

How does the IRS track cryptocurrency transactions?

Starting in 2026, centralized cryptocurrency exchanges are required to report transactions on Form 1099-DA, similar to how brokerages report stock trades on Form 1099-B. The IRS also uses blockchain analytics firms (Chainalysis, CipherTrace) to trace on-chain transactions and match them to known wallet addresses. John Doe summonses issued to major exchanges (Coinbase in 2016, Kraken in 2021, Circle in 2023) have already provided the IRS with account-holder data for millions of users. Every federal income tax return now includes a question on the first page asking whether you received, sold, exchanged, or otherwise disposed of any digital assets during the year. Answering “no” when you had taxable crypto transactions is treated as a false statement on a tax return, which can increase penalty exposure.

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 Obligations for Small Business Owners
Cryptocurrency Tax Rules for Small Business: Accepting Bitcoin, Reporting, an…
Crypto Tax Rules for Small Businesses: Bitcoin, Stablecoins, and Digital Asse…

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 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.