Do you pay taxes on crypto before withdrawal? What the IRS says is taxable, and what Form 1099-DA reports
No tax is due because crypto is withdrawn. The IRS taxes a sale, an exchange or another disposal; moving crypto between wallets you own is a non-taxable event, though a network fee paid in crypto counts as a disposal. Brokers report gross proceeds on Form 1099-DA for sales from 1 January 2025 and basis for certain sales from 1 January 2026.
No. Withdrawing crypto is not what the IRS taxes. A sale, a swap or another disposal is the taxable event, and moving crypto between wallets or accounts you own is, in the IRS's words, "a non-taxable event". Two catches: a network fee paid in crypto counts as a disposal, and since 1 January 2025 brokers report sales to the IRS on Form 1099-DA.
Everything below is from IRS pages read on 14 October 2026. This is not tax advice; a tax professional applies it to a specific return.
Is withdrawing crypto a taxable event?
Not by itself. FAQ 38 of the IRS virtual currency FAQs, page last reviewed 30 June 2026, covers a transfer from "a wallet, address, or account belonging to you" to another one you own: "the transfer is a non-taxable event", even if the exchange sends an information return about it.
The digital assets page, last reviewed 2 September 2026, makes the same point through the Form 1040 question. A filer answers "No" if they only:
Transferred digital assets from one wallet or account you own or control to another wallet or account you own or control
But the same line continues: "unless you paid a transaction fee with digital assets." Exchanges charge withdrawal network fees in the coin being sent. Robinhood, for one, says it will "estimate the network fee and add it to the amount you want to send." That fee, paid in crypto, is listed by the IRS under "Yes": disposed of digital assets "By paying a transfer fee with digital assets". The coins moved are not taxed; the slice spent on the fee is a disposal.
What is taxable, according to the IRS?
Any sale, exchange or other disposal. The digital assets page states: "For U.S. tax purposes, digital assets are considered property, not currency." The FAQs set the rules for that property:
| Action | Form 1040 digital asset question | IRS treatment |
|---|---|---|
| Buy crypto with dollars, no sale | No | Sets basis (FAQ 8) |
| Hold crypto, no transactions | No | Nothing to report |
| Move between own wallets | No | Non-taxable (FAQ 38) |
| Pay a network fee in crypto | Yes | Disposal |
| Sell crypto for dollars | Yes | Capital gain or loss (FAQ 4) |
| Swap one crypto for another | Yes | Capital gain or loss (FAQ 16) |
| Receive crypto as payment or reward | Yes | Income |
On a sale, FAQ 4: "When you sell virtual currency, you must recognize any capital gain or loss on the sale", "subject to any limitations on the deductibility of capital losses." FAQ 7 sets the figure as the difference between "your adjusted basis in the virtual currency" and the amount received, in US dollars. FAQ 16 applies the same rule to an exchange, "including for goods or for another virtual currency". So swapping bitcoin for USDT on an exchange is a taxable sale of the bitcoin, even though no dollars change hands and nothing leaves the exchange.
The holding period sets the rate category. FAQ 6: one year or less before selling is short-term; "more than one year" is long-term.
The FAQ page carries a scope note: the FAQs "generally apply to transactions involving digital assets completed before Jan. 1, 2025." The digital assets page is the current one, and it lists the same categories.
So when do you pay taxes on crypto?
When it is sold or swapped, in the tax year of that sale. Cashing out to a bank account is a sale, then a dollar withdrawal; the tax point is the sale, not the bank transfer. Whether the money stays on the exchange afterwards changes nothing. Holding gains on a balance never sold creates no reportable disposal.
Crypto sent to an address the sender does not own, such as a casino deposit address, is outside FAQ 38, which covers only wallets "belonging to you". How the IRS treats the winnings and losses at the other end is in how gambling winnings are taxed in the US.
What does Form 1099-DA report?
Broker sales, starting with 2025. The digital assets page: "This reporting is required to be made on Form 1099-DA beginning with transactions on or after Jan. 1, 2025." Then:
Brokers must report gross proceeds for transactions effected on or after Jan. 1, 2025.
and "Brokers must report basis on certain transactions effected on or after Jan. 1, 2026." The 2026 instructions define which: a "covered security" is "a digital asset acquired after 2025", while "A digital asset that was acquired before 2026" is noncovered. For coins bought in 2025 or earlier, the form may show proceeds with no basis, and the filer supplies the basis from their own records.
The instructions also set de minimis floors below which a broker need not report individual sales: qualifying stablecoin sales that "do not exceed $10,000 for the year", specified NFT sales that "do not exceed $600 for the year", and processor (PDAP) sales "less than or equal to $600 for the year". A floor on broker reporting is not a floor on tax: the gain is taxable whether or not a form arrives.
A 1099-DA reports a sale, not a withdrawal. FAQ 38 already anticipates the confusion: a transfer between one's own accounts stays non-taxable even if an information return is issued for it.
Quick answers
Do you pay taxes on crypto before withdrawal?
No. The IRS taxes the sale or swap, not the withdrawal, and FAQ 38 calls a transfer between your own wallets "a non-taxable event". A network fee paid in crypto is a disposal. Not tax advice.
Is moving crypto from an exchange to my wallet taxable?
The transfer is not; the crypto spent on the network fee is, per the IRS digital assets page. How to buy bitcoin lists what each app charges.
When does Form 1099-DA start?
For gross proceeds, transactions on or after 1 January 2025. For basis, certain transactions on or after 1 January 2026, on assets acquired after 2025.
Is swapping one crypto for another taxable?
Yes. FAQ 16 treats an exchange for "another virtual currency" as a sale with a capital gain or loss. Prediction market positions follow their own rules: Kalshi and Polymarket taxes.
Sources
- IRS, Digital assets, page last reviewed or updated 2 September 2026, retrieved 14 October 2026
- IRS, Frequently asked questions on virtual currency transactions, page last reviewed or updated 30 June 2026, retrieved 14 October 2026
- IRS, Instructions for Form 1099-DA (2026), retrieved 14 October 2026
- IRS, Final regulations and related IRS guidance for reporting by brokers on sales and exchanges of digital assets, updated 7 November 2025, retrieved 14 October 2026
- Robinhood Support, Crypto transfers, retrieved 14 October 2026
- CryptoGuardz exchange register
About this piece
Compiled by the CryptoGuardz register team from the sources listed above. Research and drafting are AI-assisted and reviewed by a named editor before publication. Nothing here is a recommendation to gamble. If a figure or a reading is wrong, tell us and the correction is logged in public.