Taking Crypto as Payment: The Rules for a U.S. Business
What happens when a business accepts digital assets, pays with them, mines or stakes them, or holds them — property rules, basis tracking, broker reporting, and payroll in crypto.
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
The IRS treats digital assets as property. A business that accepts cryptocurrency records income at the asset's fair value when received, takes that value as its basis, and recognizes gain or loss when it later spends, sells, or converts it. Paying employees in crypto is wages at fair value; mining and staking rewards are income when received.
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How are the common events taxed?
| Event | Treatment |
|---|---|
| Customer pays in crypto | Business income at fair value in dollars on receipt; that value becomes the asset's basis |
| Business spends crypto on an expense | Deduct the expense at fair value; recognize gain or loss on the crypto spent (value minus basis) |
| Business converts crypto to dollars | Gain or loss on the conversion |
| Holding at year-end | No tax on unrealized gain or loss (Section 475 mark-to-market covers securities and commodities; whether it reaches digital assets is unsettled) |
| Paying wages in crypto | Wages at fair value, subject to withholding and payroll tax; reported on W-2 |
| Paying a contractor in crypto | Reportable on Form 1099-NEC at fair value once payments reach $2,000 for 2026 ($600 for 2025) |
| Mining or staking rewards | Ordinary income at fair value when the business has control; business income for a mining operation |
| Receiving stablecoins | Same rules — property, usually with negligible gain or loss |
| Donating crypto to charity | Deduction generally at fair value if held more than a year (limited to basis if held a year or less), with a qualified appraisal required for deductions over $5,000 |
What records are required?
Date, dollar value, and quantity for every receipt and disposal; the basis of each unit; and the wallet or account where it is held. Since January 1, 2025, basis must be tracked wallet by wallet (account by account) rather than across all holdings — Rev. Proc. 2024-28 gave a safe harbor for allocating existing basis to each wallet as of that date — and units sold are identified within the wallet: by specific identification made no later than the date and time of sale, or otherwise first-in, first-out. Payment processors that immediately convert to dollars simplify this — the business receives dollars, and the processor handles the crypto.
What reporting arrives?
Brokers and exchanges issue Form 1099-DA reporting gross proceeds for sales and exchanges on or after January 1, 2025, and — starting with 2026 sales — basis for assets acquired in the same custodial account on or after January 1, 2026; payment processors may issue Form 1099-K. Forms 1040, 1065, 1120, and 1120-S each ask whether the taxpayer received, sold, exchanged, or otherwise disposed of digital assets, and the answer must be accurate.
Does the wash sale rule apply?
Not currently. The wash sale rule covers stock and securities, and digital assets are property rather than stock or securities, so a loss realized and the asset repurchased promptly is still deductible. The 2025 tax law did not change that; a bill approved by the House Ways and Means Committee on September 16, 2026 (H.R. 10357) would extend the rule to widely traded digital assets but has not been enacted, and the economic substance doctrine can reach abusive patterns.
Frequently asked questions
Can a business hold crypto as inventory?
A dealer in digital assets can treat them as inventory; a business that merely accepts payment holds them as property.
Is receiving crypto subject to sales tax?
Sales tax applies to the sale of taxable goods or services regardless of payment form, measured by the dollar value.
What if the asset's value drops before I convert it?
The loss is deductible when realized — a capital loss for property held for investment, or ordinary for a dealer.
Does a crypto loan or collateral position create tax?
Borrowing against crypto is not a sale; interest received for lending crypto is income, though IRS guidance has not settled whether handing over the asset itself is a disposition.
Official sources
The IRS explains: “For U.S. tax purposes, digital assets are considered property, not currency.” — Internal Revenue Service, Digital assets, https://www.irs.gov/filing/digital-assets
The IRS explains: “Use Form 1099-DA to report digital asset proceeds from broker transactions.” — Internal Revenue Service, About Form 1099-DA, Digital Asset Proceeds From Broker Transactions, https://www.irs.gov/forms-pubs/about-form-1099-da
Next step
Fairlight Accounting handles U.S. domestic, cross-border (U.S.–Canada), and international tax returns, plus bookkeeping, payroll, and CFO advisory. Our bookkeeping team records each crypto receipt at its dollar value and tracks basis by wallet from day one. See pricing or book a free fit call.
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