Crypto tax basics

The case used in this module

Each module tells its own made-up Brindlecove story, so details can differ from one module to the next.

Key words

Digital asset

The IRS's term for a record of value kept on a cryptographically secured ledger, such as a blockchain. It includes cryptocurrencies, stablecoins and NFTs.¹

Disposal

Getting rid of crypto in any way, such as selling it, swapping it, spending it or giving it away. A disposal can give a gain or a loss.²³

Cost basis

What you paid for an asset, including the fees for buying it. It is taken away from what you get when you sell, to find the gain or loss.⁴⁵

Amount realized

In the US, what you receive when you sell, less the fees you paid to make the sale.⁴

Fair market value

What crypto is worth in dollars at a given moment. For a coin traded on an exchange, it is found by converting at the exchange rate.⁶

Holding period

How long you held an asset. In the US it starts the day after you got it and ends on the day you sell or swap it.⁴

Long-term capital gain

In the US, a gain on an asset held for more than one year. A lower rate may apply to it than to short-term gains, which are taxed as ordinary income.⁷

Section 104 pool

In the UK, a single running total of all your tokens of one type, with one pooled cost, used to work out the cost of each sale.⁸⁹

Same-day and 30-day rules

UK rules that match a sale with the same token bought on the same day, or in the next 30 days, before the section 104 pool is used.⁸

Allowable costs

In the UK, the costs you may take off a gain, such as the price paid and transaction fees.¹⁰

Annual Exempt Amount

The UK's tax-free allowance for capital gains each tax year. It was £3,000 as of October 2026.¹¹

Dominion and control

The point when you can sell, swap or otherwise dispose of crypto you received. The IRS counts staking rewards as income from then.¹²¹³

Hard fork

A change to a blockchain's rules that permanently splits it, which can create a new coin alongside the old one.¹³

Airdrop

Tokens sent to many addresses at once, for example as part of a marketing campaign or after a hard fork.¹³¹⁴

Form 1099-DA

The US form brokers use to report customers' crypto sales to the IRS, starting with sales on or after 1 January 2025.¹

Crypto-Asset Reporting Framework (CARF)

An OECD standard under which crypto firms report users' transactions each year, and tax authorities share the data with each other.¹⁵