Is moving Bitcoin between my own wallets taxable in the United States?

Moving BTC into self-custody is not a taxable sale where beneficial ownership does not change, though digital assets used or withheld to pay for the transaction services are disposed of. A partial transfer still requires unit identification, and those units carry their basis and holding period to the destination wallet, where the choice cannot be revisited to suit a later sale.

How does wallet-by-wallet basis identification work after January 1, 2025?

Treas. Reg. section 1.1012-1(j) applies specific-identification and default rules within a single wallet or account, so the universal basis pool spanning every wallet a taxpayer controls is gone. Without an adequate identification made no later than the time of the transaction, the earliest-acquired units in that same wallet are treated as leaving.

Is the books-and-records identification relief still available in 2026?

Yes. Notice 2026-20, released March 18, 2026, modified Notice 2025-7 and extended the relief period so that it now runs from January 1, 2025 through December 31, 2026. It covers only units held in the custody of a broker, never units in a self-custodied wallet, and the ordinary route of identifying units to the broker becomes the only route from January 1, 2027.

Can I deduct the fair market value of Bitcoin donated to charity?

Generally yes where the BTC was held more than one year, and the lesser of basis and fair market value where it was held one year or less. Where appreciated capital gain property is given to a private non-operating foundation that does not itself qualify for the 50% limit, the deduction is cut back to the donor's basis and falls under the 20%-of-AGI limit. A claimed noncash deduction above $5,000 requires a qualified appraisal.

Bitcoin Tax in the United States: Basis, Mining and 1099-DA

Q: Does the Form 1099-DA my broker sends fix my cost basis?

No. For 2026 and later, basis reporting is mandatory only for digital assets that are covered securities, and an asset is generally noncovered if acquired before 2026 or transferred into the broker's custodial account rather than acquired there. A 2026 Form 1099-DA can therefore report a sale accurately while carrying no authoritative basis history at all. Reconcile the form to your ledger, not the other way round.

Bitcoin tax in the United States runs on one rule. Every time a client moves Bitcoin, the return needs a US-dollar number: an amount, on a date, attached to specific units with a specific cost basis and holding period. Not a satoshi count, not a wallet screenshot, not an exchange app's profit-and-loss tab.

That is the real weight of Bitcoin tax in the United States, and it descends from one 2014 decision. The Internal Revenue Service treats convertible virtual currency as property, not currency (IRS Notice 2014-21, as modified by Notice 2023-34). Selling it, swapping it or buying a coffee with it can each produce gain or loss; receiving it for work produces ordinary income that also fixes the basis of the units received.

What changed recently is the bookkeeping. Since 1 January 2025 the identification rules run wallet by wallet and account by account rather than across a taxpayer's holdings as a whole (Treas. Reg. §1.1012-1(j)), and Form 1099-DA basis reporting for covered digital assets is required for 2026 sales (2026 Instructions for Form 1099-DA).

US basis is tracked wallet by wallet, account by account

Digital assets are property. Universal or multi-wallet basis pooling is no longer available.

Property, not currencyEvery disposal needs a USD computation, including spending and swapping.
Basis sits in one wallet or accountTreas. Reg. §1.1012-1(j) applies the rules within a single wallet or account.
Make an adequate identificationNo later than the date and time of the sale, disposition or transfer.
Otherwise the default appliesThe earliest-acquired units in that same wallet or account are treated as sold.

Where the rule lands in practice

Self-custodied walletIdentify in your own books before the transaction
Broker custodyBooks-and-records identification available through 31 Dec 2026
Form 1099-DAA new evidence stream: it does not replace your ledger
Reconcile, do not deferYour identification governs even if the broker form differs

Notice 2026-20 modified Notice 2025-7 and extended the broker-custody relief period through 31 December 2026. The IRS FAQ page has not been updated for it.

Scope and date. US federal tax only, using IRS guidance and regulations reviewed through August 29, 2026. State and local tax are a separate system (section 8). This is educational research, not personal tax advice.

1. Bitcoin tax in the United States starts from property, and that is the whole model

Notice 2014-21 established the federal rule: convertible virtual currency is treated as property, and general tax principles applicable to property transactions apply to transactions using it (Notice 2014-21). Cite it in current form. Notice 2023-34 modified its background discussion of legal-tender status while stating that the revision "does not affect the answers to the frequently asked questions set forth in section 4 of Notice 2014-21" (Notice 2023-34), and the IRS carries the property model forward unchanged (IRS, Digital Assets).

So a preparer stops thinking about money leaving a wallet and asks the questions asked of any property. Was it acquired, disposed of, or received as income? What was its US-dollar fair market value (FMV) at that moment? What basis and holding period attach, and which units were identified as leaving? That last question is what the 2025 regulations turned into a records problem.

2. Bitcoin tax treatment by transaction

The table is a map, not the analysis. The property rule does not make every sale a capital gain: the character of the BTC in the taxpayer's hands (investment, inventory, dealer stock) is settled separately and can change the second column. Flattening every disposal into "capital gains" is a common error in crypto tax software output.

Bitcoin event	Typical US federal tax consequence	Source
Buy BTC with US dollars	Acquisition, not income; basis is cash paid plus qualifying costs	IRS FAQs
Sell BTC for US dollars	Gain or loss: amount realised less adjusted basis	IRS FAQs
Exchange BTC for ETH	Full disposition of the BTC; the ETH takes its own basis. No like-kind relief: the Tax Cuts and Jobs Act limited section 1031 to real property for exchanges completed after 2017	IRS FAQs; 26 U.S.C. §1031
Spend BTC on goods or services	Disposition of the BTC, plus cost basis in what was acquired	IRS FAQs
Transfer BTC between your own wallets	Not a disposition, apart from BTC used or withheld to pay transaction services, but a partial transfer still requires unit identification (section 3)	IRS FAQs, Q81 and Q82
Receive BTC for services as a contractor	Ordinary income at FMV on receipt, which becomes those units' basis; generally self-employment income	IRS FAQs, Q60
Receive BTC as employee wages	Wages at FMV, subject to income-tax withholding, FICA and FUTA, reported on Form W-2	IRS FAQs, Q61
Mine BTC	Gross income at FMV on the date of receipt; self-employment tax can apply if mining is a trade or business	Notice 2014-21, as modified by Notice 2023-34
Gift BTC to an individual	Not a disposition by the donor; gift-tax reporting can apply and the recipient's basis derives from the donor's	Form 709 instructions; IRS FAQs, Q75-Q77
Donate BTC to a qualified charity	Not a sale, so no gain is recognised on the transfer. Deduction generally FMV if held more than one year, else the lesser of basis and FMV, but a gift of appreciated BTC to a private non-operating foundation is cut back to basis, capped at 20% of adjusted gross income (AGI)	IRS FAQs, Q78; 26 U.S.C. §1011(b); Pub. 526
Receive a new asset after a hard fork	Ordinary income when received with dominion and control, generally the time the fork is recorded on the ledger; no income where no new units are received	IRS FAQs

3. Basis wallet by wallet, and the partial-transfer trap

For digital-asset sales, dispositions and transfers on or after January 1, 2025, Treas. Reg. §1.1012-1(j) applies specific-identification and default rules within a single wallet or account (Treas. Reg. §1.1012-1(j)). The universal basis pool spanning every wallet a taxpayer controls is gone. In self-custody, specific identification works only where the taxpayer identifies the units in its books and records no later than the time of the transaction and keeps records establishing which units were removed; otherwise the earliest-acquired units in that wallet are treated as leaving, a first-in, first-out (FIFO) rule scoped to one wallet rather than to the taxpayer (IRS FAQs, Q82 and Q86). For units in a broker's custody the rules operate within that account, with their own timing requirements (IRS FAQs, Q85 and Q87, but read section 6 first: those answers were added December 15, 2025 and do not reflect Notice 2026-20).

Note the word transfers. Moving BTC into self-custody is not a taxable sale where beneficial ownership does not change, though digital assets used or withheld to pay for the transaction services are disposed of (IRS FAQs, Q81). But a taxpayer holding units of one digital asset in a single unhosted wallet who intends to "sell, dispose of, or transfer less than all of these units" must still identify the basis and holding period of the units that leave (IRS FAQs, Q82). So a client who moves 1 BTC out of a wallet holding 3 BTC bought at three different prices has made a basis decision, even though no tax is due and nothing appears on any return, and those units carry their basis and holding period to the destination wallet, where the choice cannot be revisited to suit a later sale.

Fees compound it. A fee can adjust basis or reduce the amount realised depending on the underlying transaction, and when paid in BTC that BTC is disposed of in its own right (IRS FAQs). One on-chain transaction can therefore carry a non-taxable transfer of principal, a taxable disposition of the fee BTC and a basis adjustment at once, so the net change in the wallet balance corresponds to none of the three. Own-wallet transfers need the same lot-level discipline as sales: exactly the discipline most tax importers skip.

A Bitcoin wallet builds each transaction by selecting unspent transaction outputs (UTXOs), discrete chunks of BTC left over from earlier transactions, and that choice is made by software optimising for fees and privacy. Neither the composition nor the ordering of those inputs identifies units in the taxpayer's records.

Protocol provenance is not a substitute for tax-lot identification. Tax identification is a bookkeeping act, not a protocol event.

4. Income: services, wages and mining

Where a taxpayer receives BTC for services, the US-dollar FMV at receipt is included in income and generally becomes the basis of those units, so a later sale is a separate event measured against that basis (IRS FAQs). For an independent contractor that FMV is generally self-employment income (IRS FAQs, Q60); for an employee it is wages, subject to federal income-tax withholding, FICA and FUTA and reported on Form W-2 (IRS FAQs, Q61). An employer paying in BTC therefore has a dollar-denominated payroll obligation funded in an asset whose price moved while payroll ran, and, separately, a disposition of the BTC used to settle it.

Mining follows the same receipt-based logic: the FMV of the currency as of the date of receipt is included in gross income, and net earnings from mining carried on as a trade or business other than as an employee can attract self-employment tax (Notice 2014-21, as modified by Notice 2023-34). Hardware is recovered through depreciation, but that does not necessarily mean multi-year recovery: P.L. 119-21 reinstated the 100% special depreciation allowance for certain qualified property acquired and placed in service after 19 January 2025, so an ASIC bought and switched on in 2026 may be fully expensed in year one (IRS Pub. 946).

Notice 2014-21 predates the pool structures that now dominate hashrate, and the reviewed IRS guidance does not say whether a contractual pool reward is income when a private balance is credited or only when paid, how a pay-per-share (PPS) or full-pay-per-share (FPPS) accrual is treated, or what a payout threshold does to timing. A commercial miner should not treat "the date BTC hit the wallet" as a recognition rule without reading what the pool agreement entitles it to, and when.

5. Gifts and charitable donations

Gifts and charitable donations look identical on-chain and behave very differently in the return.

A gift to an individual is not a disposition by the donor, but it transfers a basis problem. The recipient's basis generally derives from the donor's, with a separate rule limiting loss where FMV at the date of gift was below that basis, and the recipient's holding period generally includes the donor's (IRS FAQs, Q75-Q77); Form 709 gift-tax reporting can apply above the annual exclusion (Form 709 instructions). If the donor's records do not travel with the coins the answer is not indeterminate, it is adverse: the IRS position is that "if you do not have any documentation to substantiate the donor's basis, then your basis is zero", and the holding period "begins the day after you receive the gift", so the entire proceeds figure is short-term gain.

A donation to a qualified charity is more valuable and more often mishandled. It splits into three questions.

Is there gain? An outright contribution is not a sale or exchange, so the donor recognises no gain on the transfer itself: the entire reason donating appreciated long-term BTC beats selling it and donating the cash. The exception is a bargain sale: where the charity pays something for the BTC, the transfer splits into a sale part and a contribution part, and gain is computed on the sale part against apportioned basis (26 U.S.C. §1011(b); IRS Pub. 544).

How large is the deduction? Generally FMV where the BTC was held more than one year, and the lesser of basis and FMV where it was held one year or less; amounts paid to effect the transfer are not included (IRS FAQs, Q78). That FMV answer is not universal. Where appreciated capital gain property is given to or for the use of a private non-operating foundation that does not itself qualify for the 50% limit, the deduction is cut back to the donor's basis (a conduit foundation distributing 100% of contributions within 2½ months, or a pooled-common-fund foundation, does qualify and escapes the cutback) and falls under the 20%-of-AGI limit rather than the 30% limit for capital gain property given to a 50% limit organisation (IRS Pub. 526). The qualified appreciated stock exception does not reach Bitcoin. Donor-advised funds sponsored by public charities, and private operating foundations, escape the cutback. Confirm which the donee is before promising an FMV deduction.

What substantiation? A claimed noncash deduction above $5,000 requires a qualified appraisal and a Form 8283, Section B, signed by the donee (IRS Pub. 526). The IRS Office of Chief Counsel has advised that no reasonable-cause exception applies to donated cryptocurrency and that a value reported on a crypto exchange does not satisfy the requirement (CCA 202302012). Chief Counsel Advice may not be cited as precedent, but it reliably indicates what an examiner will do.

6. The 2025-2026 transition

Revenue Procedure 2024-28 gave a safe harbour for allocating pre-2025 unused basis to the wallets and accounts holding the taxpayer's remaining units. That window is all but closed. The allocation had to be completed in the taxpayer's own books and records by a fixed date, with no form and no late election. A global allocation is gone entirely: the method had to be described "in the taxpayer's books and records before January 1, 2025" (§5.02(5)(a)). A specific unit allocation had to be completed before the earlier of the first sale, disposition or transfer of that asset type on or after January 1, 2025, and the due date (with extensions) of the return for the year including January 1, 2025 (§5.02(4)). So a client who transacted in that asset on or after January 1, 2025 missed the deadline at that first transaction; for a calendar-year individual or C corporation that has not yet disposed, the outer limit is April 15, 2026, or October 15, 2026 if timely extended. A calendar-year partnership or S corporation runs to March 16, 2026, or September 15, 2026 if timely extended, because §5.02(4)(b)(i) pegs the date to that taxpayer's own return. The safe harbour reaches only unused basis held as of January 1, 2025, and any allocation is "irrevocable for all purposes of section 1012" (Rev. Proc. 2024-28 §4.02(6)).

Notice 2025-7 separately gave temporary relief for identifying digital assets held in the custody of a broker. Under that relief, the identification could be made on the taxpayer's own books and records, either unit by unit at the time of the disposal, or by a standing order recorded in advance, without first communicating it to the broker.

That relief did not end in 2025. Notice 2026-20, released March 18, 2026, modified Notice 2025-7 and extended the relief period so that it now runs from January 1, 2025 through December 31, 2026.

The IRS extended it for a practical reason: some custodial brokers have not finished building systems to accept specific identifications, and without the extension those disposals would have fallen to the FIFO default.

So for 2026 disposals, the books-and-records route is still available. Four limits apply:

it covers only units held in the custody of a broker, never units in a self-custodied wallet;
it covers only disposals occurring inside the relief period, and cannot be relied on afterwards;
a taxpayer relying on the Rev. Proc. 2024-28 safe harbour may use it "only after the applicable requirements of Rev. Proc. 2024-28 have been satisfied" (Notice 2026-20 §4.04); and
it does not change what the broker reports (see below).

The ordinary route (identifying units to the broker itself, or giving the broker a standing order) remains available throughout, and becomes the only route from January 1, 2027.

One point is easy to miss and worth money at a restrictive broker. Ordinarily, if a broker offers only one identification method, §1.1012-1(j)(3)(ii) treats it as a standing order and the taxpayer may not use another. Notice 2026-20 §4.03 disapplies that rule during the relief period where the taxpayer makes an adequate identification on its own books and records. A client at a FIFO-only broker is therefore not locked into FIFO for 2026.

What this means when the 1099-DA does not match your ledger

The relief does not apply to the broker information-reporting rules, so a Form 1099-DA can show a different acquisition date and basis than the taxpayer's own identification.

Notice 2026-20 answers that directly. For 2026 disposals, where the taxpayer made an adequate identification on its own books and records under the notice, those are the units treated as disposed of for federal income-tax purposes regardless of whether the information the broker reported matches the taxpayer's books and records (§4.05).

In practice: keep the identification, keep evidence it was made no later than the disposal, and reconcile against the broker form rather than defer to it.

Check the date before you rely on the IRS FAQs here. The digital-asset FAQ page was last updated June 29, 2026 and its identification answers were added December 15, 2025, before Notice 2026-20. Q84 is written for 2025 disposals only; Q88's post-2025 paragraph requires the standing order to be "in place with the custodial broker"; Q85 presents the broker route as the only route after December 31, 2025; and Q89 says a broker's sole offered method must be used. None of them reflects the extended relief period. The notice controls.

7. Form 1099-DA is evidence, not a ledger

For 2025 sales, Form 1099-DA reporting generally focused on gross proceeds with basis reporting largely voluntary (2025 Instructions for Form 1099-DA). For 2026 and later, gross-proceeds reporting is mandatory, basis reporting is mandatory for digital assets that are covered securities and optional for noncovered securities, and an asset is generally noncovered if acquired before 2026, transferred into the broker's custodial account rather than acquired there, or acquired when the broker was not providing custodial services (2026 Instructions for Form 1099-DA). For a long-term Bitcoin holder that describes most of the position, so a 2026 Form 1099-DA can report a sale accurately while carrying no authoritative basis history at all. Self-custody, peer-to-peer and out-of-scope-provider activity appears on no broker form, and that absence is not evidence that it is not reportable; the taxpayer remains responsible either way (IRS, Digital Assets). Keep a lot-level ledger (wallet or account, acquisition date, quantity, US-dollar basis and its source, identification method, disposition date, proceeds, fees, holding period, own-wallet transfers, broker forms received) and reconcile the form to the ledger, not the other way round.

8. Where federal law stops: state tax, and the gaps

There is no federal VAT or GST, so nothing above creates an indirect-tax liability on a Bitcoin payment, but state and local sales and use taxes are a separate system with fifty-odd answers. Washington State, for example, treats Bitcoin accepted by a seller as consideration for a taxable retail sale, with sales tax computed on the US-dollar value of the BTC at the time of sale (Washington Department of Revenue). Other states reach that result differently or not at all.

Federal guidance also provides no Bitcoin-specific rule for mining-pool accrual timing, lending, collateral liquidation, Lightning channel funding, lost private keys, custodian failure, or deliberate burns to unspendable outputs. A gap in crypto-specific guidance is not an absence of law: a deductible theft loss still requires a theft under the applicable state law, and property that simply becomes inaccessible is not a theft (IRS Pub. 547), while a frozen account normally lacks the closed and completed transaction an investment loss requires (Taxpayer Advocate Service). Name the gap, analyse the substance, and document the position.

Practical takeaway

Bitcoin tax in the United States rests on three points: Bitcoin is property; every disposition needs a US-dollar computation; basis identification now runs wallet by wallet and account by account. 2026 adds a fourth point: Form 1099-DA is an evidence stream, not a substitute for the taxpayer's ledger, and for disposals through the end of 2026 the books-and-records identification relief in Notice 2026-20 remains available for units held at a broker.

This is one jurisdiction of several in the series. The Canadian and UK rules identify units differently, and our crypto tax accounting guide covers the ledger discipline all three require.

Sources and further reading

IRS, Digital Assets
IRS, Frequently asked questions on digital asset transactions (page last updated 29 June 2026; the identification answers were added 15 December 2025 and predate Notice 2026-20)
IRS Notice 2014-21
Treas. Reg. §1.1012-1
IRS Revenue Procedure 2024-28
IRS Notice 2025-7
IRS Notice 2026-20 (modifies Notice 2025-7; extends the relief period through December 31, 2026)
IRS, 2026 Instructions for Form 1099-DA
IRS, 2025 Instructions for Form 1099-DA
IRS, Understanding your Form 1099-DA
IRS Publication 526, Charitable Contributions
IRS Publication 946, How To Depreciate Property
IRS Publication 547, Casualties, Disasters, and Thefts
IRS, Instructions for Form 709
Taxpayer Advocate Service, When can you deduct digital asset investment losses?
Washington Department of Revenue, Interim statement regarding Bitcoin

Educational research only. Federal, state and local tax outcomes depend on the taxpayer's facts and current law.