235 terms from your tax return, your crypto report, and your books, each explained in plain English with a worked example and the IRS source behind it. Search, filter by topic, or jump to a letter.
The payment level at which apps and marketplaces (PayPal, Venmo goods and services, eBay, Etsy) must send you Form 1099-K. Reset to $20,000 and more than 200 transactions for 2025 onward after several years of lower thresholds.
Tokens Aave issues to represent an outstanding loan, with variable or stable interest accruing to the balance. They are non-transferable and track what you owe.
Recording income when earned and expenses when incurred, rather than when cash moves. Required for some businesses and common for those with inventory or outside investors.
Your total income minus specific deductions such as retirement contributions and half of self-employment tax. Many credits and phase-outs key off AGI, so it is the number that decides what else you qualify for.
Tokens delivered to a wallet without a purchase. The IRS treats an airdrop as ordinary income at its value when you gain control of it; that value becomes your cost basis for a later sale.
Performing on-chain activity, often across many wallets, to qualify for anticipated airdrops. Sybil detection is the protocol's effort to exclude wallets controlled by one person.
A parallel tax calculation that limits certain deductions and exclusions. Exercising incentive stock options is the most common way individuals trigger it.
A corrected return filed after the original, on Form 1040-X for individuals. Used to fix errors, claim a missed credit, or report income left off the original.
How mining hardware is written off: as depreciable equipment over five years for a mining business, with section 179 and bonus depreciation available in the year placed in service.
An Aave receipt token representing supplied assets. Its balance reflects interest earned on the underlying lending position.
Automatically reinvesting earned returns into a strategy instead of leaving them as separately held rewards.
A trading system that uses smart contracts and liquidity pools to price and exchange tokens without a traditional order book.
Contributing to a traditional IRA with after-tax money and converting it to a Roth, used by people whose income is too high to contribute to a Roth directly.
Matching every transaction in the books to the bank and card statements for the period, so the book balance and the bank balance agree and nothing is missing, duplicated, or miscoded.
Your investment in a pass-through entity, adjusted each year for income, losses, contributions, and distributions. It limits the losses you can deduct and determines whether distributions are taxable.
Holding a spot Bitcoin or Ether ETF in a 401(k), IRA, or Roth rather than in a taxable brokerage account.
How mining pools pay participants: full pay per share (FPPS) pays for work submitted regardless of blocks found; pay per last N shares (PPLNS) pays only when the pool finds a block.
A system that supplies external data, such as market prices, to smart contracts that cannot directly retrieve it themselves.
One of two ways to qualify for the foreign earned income exclusion: being a resident of a foreign country for an uninterrupted period that includes a full tax year, based on your intent and ties, not a day count.
An immediate deduction for the full cost of qualifying equipment and other short-lived property in the year it is placed in service. Restored to 100 percent for property acquired after January 19, 2025, and made permanent.
The monthly process of reconciling accounts, categorizing transactions, recording adjustments, and locking the period so the financial statements are final.
Bookkeeping records transactions: categorizing, reconciling, and closing the books each month. Accounting interprets them: financial statements, tax positions, planning, and advice. One produces the data; the other uses it.
The possibility of loss from failures or exploits in the contracts and related mechanisms used to move value between blockchains.
Moving an asset from one blockchain to another through a bridge, which typically locks the original and issues a representation on the destination chain. The IRS has not said whether a bridge is a taxable exchange.
A bridge mechanism that destroys tokens on the source chain and issues corresponding tokens on the destination chain.
A corporation taxed as its own entity at a flat 21 percent, with shareholders taxed again on dividends. Used by companies raising venture capital, retaining earnings, or planning for qualified small business stock.
The profit on selling property, including crypto and stock, measured as proceeds minus cost basis. Short-term if held a year or less and taxed as ordinary income; long-term if held longer and taxed at lower rates.
Net capital losses beyond the $3,000 annual limit against ordinary income carry forward indefinitely to offset future gains.
Recording income when received and expenses when paid. The default for most sole proprietors and small businesses.
Interest-style products on centralized exchanges (Coinbase, Kraken, Nexo, Binance) that pay yield for lending your crypto to the platform or its borrowers.
The list of categories a business uses to record every transaction: assets, liabilities, equity, income, and expenses, each with a number and a name. It is the structure the financial statements and the tax return are built on.
A City of Chicago tax on leases and rentals of personal property used in the city, including software and cloud services. The rate rose to 15 percent effective January 1, 2026.
A federal credit of $2,200 per qualifying child under 17 for 2025, indexed for inflation going forward, phasing out above $200,000 of income ($400,000 joint). Up to $1,700 is refundable.
Liquidity supplied within a selected price range, allowing a provider to concentrate capital where trades occur.
Cosmos chains impose an unbonding period (often 21 days) before staked tokens can move, and IBC lets tokens move between Cosmos chains.
Cost basis is what you paid for an asset, including fees, adjusted for later events such as splits, returns of capital, or wash sales. Gain or loss on a sale is proceeds minus basis. In crypto, basis has to follow each unit from the exchange where it was bought, through every wallet it touched, to the platform where it was sold.
A study that reclassifies parts of a building from 39-year or 27.5-year property into shorter-lived categories, accelerating depreciation.
A covered digital asset was acquired on or after January 1, 2026 in a custodial broker account, so the broker reports its cost basis. Anything acquired earlier, or transferred in from elsewhere, is noncovered and reported with proceeds only.
Buying and selling related crypto positions to exploit price differences across markets, pools, or venues.
Buying crypto with cash, or selling crypto for cash, at a kiosk.
Cards (Coinbase Card, Crypto.com Visa) that sell your crypto at the point of purchase to pay the merchant in dollars.
Giving cryptocurrency to a qualified charity. Appreciated crypto held more than a year is deductible at fair market value with no tax on the gain; donations over $5,000 require a qualified appraisal and Form 8283.
Derivative contracts on crypto prices. Regulated futures traded on a US exchange such as CME are section 1256 contracts, marked to market at year end and taxed 60 percent long-term and 40 percent short-term. Perpetual swaps on offshore or decentralized platforms are not, and are generally taxed as ordinary capital transactions when closed.
Giving cryptocurrency to another person without receiving anything in return. Gifts are not income to the recipient and not a sale by the giver; the recipient takes the giver's basis and holding period.
Holding crypto through a legal entity: a single-member LLC (disregarded), a multi-member LLC or partnership, an S corporation, or a trust.
Holding crypto inside an IRA through a custodian that supports it, or through a checkbook-control LLC owned by the IRA.
Borrowing against crypto collateral, on a centralized platform or a DeFi protocol. Borrowing is not a sale, so posting collateral and receiving the loan is not taxable. A liquidation, where the platform sells your collateral to cover the loan, is a disposal.
Cryptocurrency you receive for goods, services, or wages. It is ordinary income at fair market value on the day you receive it, and that value becomes your cost basis for a later sale.
Credit cards that pay rewards in crypto on dollar purchases, such as a percentage back in Bitcoin.
Records of digital asset acquisitions, dispositions, values, and basis used to substantiate tax reporting.
A crypto-to-crypto swap is trading one cryptocurrency directly for another, on an exchange or a decentralized protocol. The IRS treats it as a sale of the coin you gave up, at its fair market value at that moment, followed by a purchase of the coin you received. Gain or loss is recognized on the swap even though no dollars changed hands.
A Compound v2 receipt token whose exchange rate against the supplied asset increases as lending interest accrues.
Depositing into a Curve pool for an LP token, then staking that LP token in a gauge to earn CRV rewards, and often depositing the gauge position into Convex for boosted rewards.
Tokens that give voting rights in a decentralized organization, often distributed to contributors or users. Tokens received for contributions are compensation income; airdropped governance tokens are income at receipt; sales are capital transactions.
An election that lets a business expense items costing up to $2,500 each (or $5,000 with an applicable financial statement) instead of capitalizing and depreciating them.
A platform where users trade crypto through blockchain protocols, generally without depositing assets with a centralized exchange operator.
Lending, borrowing, swapping, and yield activity run by smart contracts rather than an exchange. Each swap is generally a taxable disposal; rewards are generally income when received.
Crypto pledged to support a borrowing position and potentially available for liquidation if the position becomes undercollateralized.
Supplying crypto to a lending protocol so borrowers can use it, typically in exchange for variable yield.
A smart contract that pools deposits and applies a defined strategy, often issuing shares that represent each depositor's interest.
An exchange removing a token from trading and requiring holders to withdraw it, or converting it to another asset, by a deadline.
Deducting the cost of a business asset over its useful life rather than all at once. Buildings, equipment, and vehicles are depreciated; land is not.
The transition procedure in Revenue Procedure 2024-28 for allocating unused basis to assets held in wallets or accounts as of January 1, 2025.
Any platform that effects sales of digital assets for customers and is required to file Form 1099-DA: centralized exchanges, hosted wallet providers, and payment processors. Decentralized protocols and self-custody wallets are not brokers under the current rules.
Cash or property paid out to an owner from a pass-through entity's profits. Distributions are generally not taxed when paid because the owner was already taxed on the profit; they reduce the owner's basis.
The test the IRS uses for when crypto income is received: the moment you can sell, exchange, or transfer the asset. Rewards that are locked or unclaimable are not income until they can be accessed.
Tiny leftover token balances, often worth cents, that are uneconomical to sell because the fee exceeds the value.
Trading fees that change with market conditions or programmed rules instead of remaining at a fixed pool rate.
A sales tax obligation created by selling into a state above a dollar or transaction threshold, without any physical presence there. Every state with a sales tax has adopted it since the 2018 Wayfair decision.
Total tax divided by total income: the average rate you actually paid, as opposed to the marginal rate on your last dollar.
Restaking ETH or liquid staking tokens through EigenLayer to secure additional services (AVSs) and earn rewards from each, on top of the base staking yield.
A nine-digit number the IRS assigns to a business for tax filing, payroll, and banking. It is free from the IRS and takes minutes online.
An Ethereum standard that defines common interfaces for depositing assets, issuing vault shares, and redeeming shares for underlying assets.
Quarterly payments to the IRS and state for income not covered by withholding, such as self-employment, investment, or crypto income. Underpaying triggers a penalty even if you pay in full in April.
The difference between a periodic summary an exchange sends you and the full transaction-level CSV export of every trade, transfer, fee, and reward.
The loss on crypto held at a platform that failed (FTX, Celsius, Voyager, BlockFi). Your asset becomes a claim against the estate; the loss is generally recognized when the claim is settled, sold, or determined worthless, not when the platform froze.
An automatic six-month extension of the filing deadline, requested on Form 4868 for individuals. It extends the time to file, not the time to pay.
An attempted blockchain operation that does not complete successfully. An included transaction may still consume gas even when its state changes revert.
The US dollar value of a digital asset at the time of a transaction, used to measure income received and proceeds on a disposal. The IRS requires a reasonable method applied consistently, typically a price from a reputable exchange or index at the transaction time.
The Report of Foreign Bank and Financial Accounts, filed with FinCEN when the combined value of your foreign accounts exceeds $10,000 at any point in the year. Separate from the tax return, with its own penalties.
The default cost basis method: when you sell part of a holding, the oldest units are treated as sold first. Applies per wallet or account for crypto since 2025.
A loan that must be repaid, with any required fee, within the same blockchain transaction or the transaction reverses.
An exclusion, claimed on Form 2555, that removes a set amount of wages earned abroad from US tax for qualifying expats.
An exclusion, claimed with the foreign earned income exclusion on Form 2555, for reasonable housing costs abroad above a base amount, subject to a cap that varies by city.
A credit, claimed on Form 1116, that offsets US tax with income tax paid to another country on the same income.
The yes-or-no question near the top of Form 1040 asking whether you received, sold, exchanged, or otherwise disposed of a digital asset during the year. It is signed under penalties of perjury.
The IRS worksheet and payment vouchers for quarterly estimated tax. Most people pay online instead of mailing vouchers, but the form is the calculation.
The broker statement reporting sales of stocks, bonds, and other securities with proceeds and, for covered shares, cost basis.
Reports payments received through third-party networks and marketplaces above a threshold. Gross, not net; you still deduct costs on the return.
The form US exchanges issue for $600 or more of crypto income such as staking rewards, earn program yield, and referral bonuses.
Reports nonemployee compensation of $600 or more paid to a contractor. Issued by the payer by January 31.
Form 1099-DA is the IRS information return that brokers and exchanges file to report your digital asset sales. It shows gross proceeds for every sale and, starting with assets you acquired at that broker on or after January 1, 2026, the cost basis. A copy goes to the IRS, which matches it against your Form 8949. The form usually overstates your gain, because it cannot see the basis of coins you transferred in.
The form for claiming the foreign tax credit, separated by income category, with a limitation based on the ratio of foreign to total income.
The form that elects S corporation tax treatment for a corporation or LLC.
The form for claiming the foreign earned income exclusion and the foreign housing exclusion or deduction.
The application for a change in accounting method, used to switch between cash and accrual, correct depreciation errors, or change inventory methods.
The report for large gifts or bequests from foreign persons (over $100,000 from an individual, or over $19,570 from a foreign corporation, adjusted annually) and for transactions with foreign trusts.
The information return a US person files for ownership or control of a foreign corporation. Required for officers, directors, and 10 percent or greater shareholders, with the penalty for a missing form starting at $10,000 per year.
The S corporation shareholder stock and debt basis form, required when the shareholder receives a distribution, claims a loss, or disposes of stock.
The report a trade or business must file when it receives more than $10,000 in cash in one transaction or related transactions. A 2021 law extended it to digital assets, but the IRS has said businesses need not report crypto under it until regulations are issued.
The annual information return a US person files for each passive foreign investment company they own, reporting income, distributions, and any qualified electing fund or mark-to-market election.
The Statement of Specified Foreign Financial Assets, attached to the tax return when foreign assets exceed thresholds that depend on filing status and residence. Overlaps with, but does not replace, the FBAR.
The schedule listing every sale of capital assets with date acquired, date sold, proceeds, basis, and adjustments. Crypto disposals are reported here, then totaled on Schedule D.
The letter codes in column (f) of Form 8949 that explain why your reported basis or gain differs from what a broker reported.
The annual federal unemployment tax return. FUTA is paid by employers only, at 6 percent on the first $7,000 of each employee's wages, reduced to 0.6 percent when state unemployment tax is paid on time.
The quarterly federal payroll tax return an employer files to report wages paid, income tax withheld, and both halves of Social Security and Medicare tax. Due the last day of the month after each quarter.
The form a business collects from a contractor or vendor to get their taxpayer identification number before paying them. It is the source document for the 1099 the business issues in January.
Starting with tax year 2026, only 90 percent of gambling losses are deductible, and still only up to the amount of winnings. Breaking even now produces taxable income.
Transaction fees paid to a blockchain network, usually in the network's native token, to execute a transfer, swap, or contract interaction.
The total amount you received when you sold or exchanged crypto through a broker, before subtracting what you paid. It is the number Form 1099-DA reports to the IRS.
A blockchain split that creates a new coin. If you receive new units you can control, the IRS treats their value as income when received.
Paying a provider for mining capacity and receiving the mined coins, without owning the hardware.
A lot-selection approach that treats the units with the highest cost basis as sold first, minimizing current gain. It is a form of specific identification, not a separate IRS method.
The IRS test for whether an activity is a business (losses deductible) or a hobby (income taxable, expenses not deductible since 2018). The presumption is a business if it shows a profit in three of five years, but the real test is profit motive.
A deduction for the business use of part of your home, available to self-employed people who use a space regularly and exclusively for business. Employees cannot claim it.
An election that lets an Illinois partnership or S corporation pay state income tax at the entity level at 4.95 percent, deductible on the federal return, with owners receiving a credit on their Illinois returns.
An Illinois tax on business income paid in addition to income tax: 1.5 percent for S corporations, partnerships, and trusts, 2.5 percent for C corporations. It is reported on the entity's Illinois return.
The tax owed on purchases made outside Illinois for use in Illinois when no Illinois sales tax was collected, at the same 6.25 percent state rate. Individuals report it on Form IL-1040; businesses on their sales tax returns.
The reduction in value a liquidity provider experiences when the prices of pooled tokens diverge, compared with simply holding them. It is not a tax loss while you remain in the pool.
Cryptocurrency received from someone who has died. Basis resets to fair market value on the date of death, and the holding period is automatically long-term.
Relief from joint liability when one spouse did not know about, and had no reason to know about, an understatement caused by the other.
Specific expenses you can deduct on Schedule A instead of the standard deduction: state and local taxes up to the SALT cap, mortgage interest, charitable contributions, and medical expenses above 7.5 percent of AGI.
The schedule a partnership, S corporation, or trust issues to each owner showing their share of income, deductions, and credits. It flows to the owner's personal return.
Fees paid to use rollups such as Arbitrum, Optimism, and Base: a sequencer fee on the L2 plus a share of the cost of posting data to Ethereum.
Payment channels on Bitcoin that let two parties transact off-chain, opened and closed with on-chain transactions.
A deferral of gain when exchanging real property for similar property. It has not applied to crypto since 2018.
Staking through a protocol that provides a transferable token representing the staking position, allowing it to be used elsewhere.
A transferable token representing a position in staked assets and associated staking economics, such as stETH or rETH.
Depositing two or more tokens into a decentralized exchange pool in return for LP tokens that represent your share. The IRS has not addressed it; most practitioners treat the deposit as an exchange of your tokens for the LP token, and the withdrawal as the reverse.
An NFT representing a specific liquidity position, such as a Uniswap v3 position with its own price range and accrued fees.
A share of swap fees earned by supplying pool liquidity. Fees may accumulate in the pool or become separately claimable, depending on the protocol.
Changing a concentrated liquidity position's price bounds, often by removing liquidity and creating a new position with a different asset mix.
An LLC is a legal entity formed under state law. An S corporation is a tax election. A single LLC can be taxed as a sole proprietorship (default), a partnership, an S corporation, or a C corporation; the question is about tax treatment, not which entity to form.
A specific purchase of an asset with its own date and cost. When you sell part of a holding, which lot you sell determines the gain; specific identification lets you choose.
Locking collateral such as ETH in a MakerDAO vault (a collateralized debt position) and minting DAI against it. The DAI is a loan, not a sale of the collateral.
Borrowing from the exchange to trade larger positions than your balance, with your holdings as collateral and interest charged on the loan.
The rate applied to your last dollar of income: your bracket. It is the rate that matters for every add-or-subtract decision.
A platform such as Amazon, Etsy, or eBay that lists and processes sales for third-party sellers and is required by state law to collect and remit sales tax on those sales.
Value captured by changing which blockchain transactions are included and how they are ordered within blocks.
Coins earned by validating transactions. Ordinary income at value when received; if done as a business, subject to self-employment tax and eligible for expense deductions.
Adjusted gross income with certain items added back, used to test eligibility for specific benefits. There is no single MAGI; the add-backs differ for Roth IRA contributions, the premium tax credit, the net investment income tax, and the new tips and overtime deductions.
A distinction between an asset issued directly on a blockchain and a representation brought from another chain through a bridge.
A 3.8 percent tax on investment income, including capital gains and crypto gains, for taxpayers above $200,000 of income ($250,000 joint).
The connection between a business and a state that allows the state to require tax collection or filing. Can be physical or economic, based on sales volume into the state.
A unique token, often representing art or membership. Sales are capital transactions; some NFTs may be treated as collectibles with a higher long-term rate.
Buying or writing options on crypto through decentralized protocols, or depositing into a vault that sells options on your behalf for premium income.
Assets created on Bitcoin by inscribing data on individual satoshis (Ordinals and inscriptions) or issuing fungible tokens through the Runes protocol.
Income taxed at regular rates rather than capital gains rates: wages, business profit, interest, staking rewards, mining, airdrops.
Buying or selling crypto through an over-the-counter desk or directly with another person, outside an exchange order book.
A federal deduction for the premium portion of overtime pay (the half in time-and-a-half) up to $12,500, or $25,000 on a joint return, for tax years 2025 through 2028.
Money a sole proprietor, partner, or LLC member takes out of the business for personal use. It is not a salary and is not itself taxed; the owner is taxed on the business profit whether or not it is drawn.
A business whose income is taxed on the owners' returns rather than at the entity level: partnerships, S corporations, and most LLCs.
Losses from rental real estate and businesses in which you do not materially participate. They can only offset passive income, with the excess suspended until you have passive income or sell.
Periodic payments between long and short holders of a perpetual futures contract that keep its price near spot. You either pay or receive funding, usually every eight hours.
A foreign corporation whose income or assets are mostly passive, which includes nearly every non-US mutual fund and ETF. US owners face punitive default taxation and a separate annual filing per fund.
The other way to qualify for the foreign earned income exclusion: being physically outside the United States for at least 330 full days in any consecutive 12-month period.
Tokens and NFTs earned inside blockchain games. Earnings are ordinary income at fair market value when you control them; selling them later is a capital transaction, and in-game purchases with tokens are disposals.
How gains from event contracts on platforms such as Kalshi and Polymarket are taxed. The IRS has issued no guidance, so the same trade can be characterized as capital gain, ordinary income, section 1256 gain, or gambling.
Buying tokens before public trading through a private sale, initial DEX offering, or launchpad, often paid in ETH or a stablecoin with delivery later.
The change in execution price caused by a trade's size relative to available liquidity.
An oracle that supplies asset prices used by protocols to value collateral, determine borrowing limits, or trigger liquidations.
A yield-tokenization asset that represents the right to redeem principal at maturity under a protocol's terms.
A deduction of up to 20 percent of qualified business income from pass-through businesses, subject to income limits and industry restrictions.
Dividends from US and certain foreign corporations on stock held more than 60 days around the ex-dividend date. They are taxed at long-term capital gains rates (0, 15, or 20 percent) instead of ordinary rates.
A realized gain happens when you sell, swap, or spend an asset for more than its basis. An unrealized gain is appreciation on something you still hold. Only realized gains are taxed.
The salary an S corporation owner must take before distributions. The IRS expects it to reflect what the owner's work would command elsewhere.
A token whose wallet balance can change automatically under protocol rules, such as a staking token that adjusts balances to reflect rewards.
Matching records from different sources until they agree. In crypto tax, matching every transfer between wallets and exchanges so nothing is double counted and basis carries through.
The amount you must withdraw each year from traditional IRAs and most workplace retirement plans starting at age 73 (75 for those born in 1960 or later). Withdrawals are ordinary income, and missing one costs a 25 percent penalty on the shortfall.
Earning additional rewards by restaking already-staked assets, or accumulating protocol "points" that later convert to tokens. Reward tokens are income when you can control them; points with no market value are generally not income until converted.
A token whose redeemable underlying value changes as rewards accrue, while the number of tokens held generally stays constant.
Moving money from a traditional IRA or 401(k) to a Roth, paying tax now so future growth and withdrawals are tax-free.
A rug pull is a project whose developers abandon it or drain its liquidity, leaving the token worthless. For tax purposes the loss is generally a capital loss, and it is recognized only when you dispose of the token or can establish that it is worthless.
A corporation or LLC that has elected pass-through taxation with the owner treated as an employee. Often used to reduce self-employment tax on business profit.
The rule that avoids the underpayment penalty: pay at least 100 percent of last year's tax (110 percent if prior-year AGI exceeded $150,000) or 90 percent of this year's, through withholding and estimates.
The limit on the itemized deduction for state and local taxes. It rose from $10,000 to $40,000 for 2025, increases 1 percent a year through 2029, and is scheduled to fall back to $10,000 in 2030. It phases down for incomes above $500,000.
A trading strategy that places transactions before and after another user's trade to profit from the resulting price movement.
Line 8 of Schedule 1 (Form 1040), where crypto income that is not from a business is reported: staking, airdrops, rewards, and mining by an investor.
The form on which a sole proprietor reports business income and expenses on the personal return.
The summary of capital gains and losses on the personal return, fed by Form 8949.
The schedule for rental real estate, royalties, and income from partnerships, S corporations, and trusts reported on K-1s.
An election to expense the cost of qualifying equipment and software in the year placed in service, up to an annual limit, instead of depreciating it.
A custodial wallet is held by a third party, usually an exchange, that controls the keys and reports your activity on Form 1099-DA. A self-custody wallet is one where you hold the keys; no one reports it, and the records are yours to keep.
Social Security and Medicare tax on business profit for sole proprietors and partners, currently 15.3 percent on most of that profit.
An additional $6,000 federal deduction for taxpayers age 65 or older, for tax years 2025 through 2028, on top of the existing extra standard deduction for seniors. It phases out above $75,000 of modified AGI ($150,000 joint).
Borrowing crypto and selling it, intending to buy it back cheaper and return it, on a centralized exchange or a DeFi protocol.
The holding period that decides the rate on a sale: one year or less is short-term and taxed as ordinary income; more than one year is long-term and taxed at 0, 15, or 20 percent. The clock starts the day after purchase.
A limited liability company with one owner. By default the IRS disregards it, so it is taxed exactly like a sole proprietorship on Schedule C, while state law gives the owner liability protection.
A protocol penalty that removes some staked assets for specified validator misconduct. It can reduce the value of a staking position.
The difference between the price expected when submitting a trade and the price actually received when it executes.
A program deployed on a blockchain that executes defined rules when called, including rules for trading, lending, or holding assets.
A transaction that calls a blockchain program and may trigger multiple asset movements, fees, or position changes.
Solana stakes through dedicated stake accounts that earn rewards each epoch, and requires a small refundable rent deposit to keep any account open.
The default form of a one-owner business with no entity election: the owner and the business are the same taxpayer, income is reported on Schedule C, and all profit is subject to self-employment tax.
A cost basis method that lets you choose which lot you are selling, provided records support it. Usually more favorable than first-in, first-out for crypto.
An exchange-traded fund that holds Bitcoin directly (IBIT, FBTC, GBTC). It is taxed as a grantor trust: you are treated as owning your share of the Bitcoin, and the fund's monthly sales to pay fees create small taxable events for you.
A token designed to hold a fixed value, usually one US dollar, such as USDC or USDT. For tax purposes it is property like any other crypto, so every use is a disposal even when the gain is a fraction of a cent.
A stablecoin trading below its intended value, either briefly (USDC in March 2023) or permanently (Terra UST in 2022).
Staking rewards are tokens you earn for locking up cryptocurrency to help validate a proof-of-stake network, either directly, through a validator, or through an exchange staking program. Under Revenue Ruling 2023-14 they are ordinary income at fair market value when you gain dominion and control, and that value becomes their cost basis for a later sale.
A fixed amount subtracted from income before tax, claimed by anyone who does not itemize. For 2026 it is $16,100 single and $32,200 married filing jointly, indexed annually.
A Pendle-compatible wrapper for a yield-bearing asset that can be split into principal and yield tokens.
Expenses incurred before a business opens (market research, travel, training, professional fees) and the legal costs of forming the entity. Up to $5,000 of each can be deducted in the first year, with the rest amortized over 15 years.
Lido's liquid staking token for ether. Its rebasing balance reflects the holder's share of the pooled staking position.
Section 1092 (straddles) defers losses on offsetting positions, and section 1259 (constructive sales) treats certain hedges of an appreciated position as a sale. Whether either reaches crypto is unsettled.
A return the IRS prepares for you when you do not file, using the income it has on record and no deductions, credits, or basis.
A deduction reduces the income that is taxed; a credit reduces the tax itself, dollar for dollar. A $1,000 deduction at a 24 percent rate saves $240; a $1,000 credit saves $1,000.
Tax loss harvesting is selling an asset at a loss to offset capital gains realized elsewhere. Losses offset gains first, then up to $3,000 of ordinary income per year, with the rest carried forward indefinitely. In crypto it is unusually flexible because the wash-sale rule does not currently apply to coins held directly.
Tracking each purchase of an asset as its own lot with date, quantity, and basis, so sales can be matched to specific lots and holding periods computed correctly.
An agreement between the US and another country that reduces or eliminates double taxation on specific income types, such as pensions, dividends, and student income, and sets tie-breaker rules for residency.
The amount your tax is actually computed on: gross income minus adjustments (which gives adjusted gross income), minus the standard or itemized deduction and the qualified business income deduction.
A federal deduction of up to $25,000 for qualified tips received in a customarily tipped occupation, for tax years 2025 through 2028. It reduces income tax but not Social Security or Medicare tax.
A protocol replacing an old token contract with a new one and asking holders to swap v1 tokens for v2, usually one-for-one.
The date on which vested tokens become transferable to a recipient, often after a cliff period, under a vesting schedule.
Tokens granted to founders, employees, or advisors that unlock over time. When granted for services, they are compensation income as they vest, at fair market value on each vesting date, unless an 83(b) election is filed within 30 days of the grant.
Tokens that represent claims on off-chain assets such as US Treasury bills, money market funds, or private credit, with yield paid on-chain.
A treaty between the US and another country that decides which country's social security system a worker pays into, so the same wages are not taxed for social security by both.
An IRS classification for individuals whose trading is frequent, substantial, and continuous enough to be a business, allowing business expense deductions and a mark-to-market election.
A unique identifier used to locate a blockchain transaction and inspect its status, asset movements, and fees.
The IRS record of what has been reported about you: wages, 1099s, and account activity. Used to reconstruct records when preparing missed years.
A transfer moves crypto between wallets or accounts you control and is not taxable. A disposal is a sale, swap, spend, or gift to someone else and is taxable. Reconciliation is the process of telling them apart.
Interest-based penalty for paying too little tax during the year through withholding and estimates, computed quarter by quarter.
Uniswap v2 issues a fungible LP token for a pool share; v3 issues an NFT for a position with a specific price range. The tax question for both is whether providing liquidity is an exchange.
Tax basis not previously assigned to disposed units, relevant to allocating basis among digital assets held in wallets or accounts.
Income earned by running a validator or node that helps secure a network. Ordinary income at receipt; if run as a business, subject to self-employment tax with hardware, hosting, and electricity deductible.
A W-2 reports wages paid to an employee, with taxes withheld. A 1099-NEC reports payments to an independent contractor, with nothing withheld. Which one applies depends on the working relationship, not on what the parties call it.
Tracking and selecting digital asset tax lots separately within each wallet or account rather than across a single universal pool.
The wash-sale rule under section 1091 disallows a loss on the sale of stock or securities when you buy substantially identical stock or securities within 30 days before or after the sale. Crypto held directly is property, not a security, so as of September 2026 the rule does not apply to it, although legislation to change that is pending. The rule does apply to spot crypto ETFs, which are securities.
Tax an employer or payer takes out and remits on your behalf. RSU vesting is often withheld at a flat rate that undershoots the actual tax.
A non-rebasing wrapper for stETH. The token count stays constant while the amount of stETH redeemable per token changes.
A token that represents another asset one-to-one on a different chain or standard, such as WETH for ETH or WBTC for Bitcoin. Wrapping locks the original and mints the wrapped version.
A protocol that routes or manages deposits across yield strategies, often automating reinvestment and strategy changes.
Depositing crypto into DeFi protocols to earn rewards, often by providing liquidity and moving between pools to chase the highest return. Rewards are ordinary income when received; each deposit and withdrawal can be a taxable exchange.
A yield-tokenization asset that represents the right to specified future yield from an underlying position until maturity.
Separating a yield-bearing position into tokens for its principal and future yield, allowing those components to trade separately.
A token representing an asset or position that generates returns, reflected through changing balances, redemption value, or distributions.
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