Taxes are due when you sell, trade, or dispose of cryptocurrency in any way and recognize a gain.
IRS Notice 2014-21 for use by taxpayers and their preparers that address the transactions in virtual currency, also known as a digital currency.
In this Notice, the IRS classifies cryptocurrency as property, and cryptocurrency transactions are taxable by law just like transactions related to any other property.
This means that a crypto-to-crypto trade is a disposition of assets and will likely result in a capital gain or loss. That capital gain or loss is equal to the difference between your cost basis—or original purchase price—in the original asset and the fair market value of the asset being acquired.
In general, your crypto activities will constitute a taxable event if you dispose of your crypto.
Some common taxable dispositions are:
• Trading one crypto for another form of crypto
• Selling crypto for fiat currency
• Spending crypto on goods or services
• Earning crypto income