Crypto taxes for U.S. expats

Cryptocurrency is the only asset class where the rules are still being written in real time, and the IRS has been catching up year by year. For U.S. expats holding crypto on foreign exchanges, the situation has three layers: U.S. income tax on every taxable event, FBAR reporting that may or may not apply (FinCEN has signaled intent to require it but hasn't finalized the rule), and Form 8938 disclosure that almost certainly applies.

This article covers what an American abroad needs to do every year with crypto for U.S. tax purposes.

The base rule: crypto is property

The IRS has treated cryptocurrency as property (not currency) since 2014. Every disposition is a taxable event with capital gain or loss. The dispositions that count:

• Selling crypto for fiat currency (USD, EUR, KRW, etc.)
• Trading one cryptocurrency for another (BTC → ETH is a taxable event — yes, even though no fiat changed hands)
• Spending crypto on goods or services (yes, that coffee purchase generates a tiny capital gain or loss)
• Receiving crypto as payment for services (ordinary income at fair market value when received)
• Mining crypto (ordinary income at fair market value when mined)
• Staking rewards (ordinary income at fair market value when received — though IRS guidance has wobbled here)
• Airdrops (ordinary income at fair market value when received and you have dominion and control)
• Hard forks where you receive new coins (ordinary income at fair market value)

Crypto-to-crypto trades being taxable is the biggest surprise for new filers. Every conversion through a stablecoin, every swap on Uniswap, every BTC ↔ ETH trade — each is a separate disposition requiring gain/loss tracking.

What's not a taxable event

• Buying crypto with fiat and holding it
• Moving crypto between your own wallets (Coinbase → MetaMask, exchange → cold wallet)
• Depositing crypto as collateral (e.g., into a DeFi lending platform) — though using the loan proceeds may have tax consequences
• Holding crypto across years (no annual mark-to-market for most crypto)

Capital gains treatment

Crypto held more than one year before disposition: long-term capital gains rates (0%, 15%, or 20% depending on income level).

Crypto held one year or less: short-term capital gains, taxed as ordinary income (10–37%).

For expats using the Foreign Earned Income Exclusion, this matters: FEIE only shelters foreign earned income. Capital gains on crypto are not earned income. Whether held abroad or domestically, crypto capital gains are fully U.S.-taxable.

If you're in a country that also taxes the gains (most do — Germany taxes after a 1-year holding period, France via PFU, UK as capital gain), you can claim the Foreign Tax Credit on the foreign tax against the U.S. tax on the same gain. Use Form 1116 in the passive basket for crypto gains.

The wash sale rule (or lack thereof) for crypto

Stocks: if you sell at a loss and rebuy within 30 days, the wash sale rule disallows the loss. Crypto: no wash sale rule applies — yet. The IRS has not extended Section 1091 to digital assets, so crypto loss harvesting (sell at loss, immediately rebuy the same coin to lock in the loss while maintaining position) currently works. Congress has proposed extending wash sale to crypto in nearly every recent tax bill; it has not passed as of 2026. Treat this as a "use while it lasts" feature.

Cost basis methods

You can use:

• FIFO (First In, First Out) — default
• LIFO (Last In, First Out)
• HIFO (Highest In, First Out) — generally the most tax-efficient
• Specific identification — requires you to specifically identify which lot you sold (most exchanges don't natively support this)

For 2026 tax year and beyond, the IRS now requires per-wallet (or per-account) cost basis tracking — you cannot pool basis across all your wallets. This is the 2024 IRS broker reporting rule that took full effect. Practical implication: each wallet's holdings are tracked independently, and a transfer between your own wallets carries cost basis with it but starts a separate ledger.

Foreign exchanges and reporting

A foreign-domiciled cryptocurrency exchange (Bitstamp Europe, Bitfinex, Binance's non-U.S. arm, Korean exchanges like Upbit, Bithumb, etc.) is a foreign financial institution for U.S. tax purposes. Three forms potentially apply:

FBAR (FinCEN Form 114) — pending

FinCEN proposed in 2020 that foreign-held cryptocurrency accounts should be FBAR-reportable. As of early 2026, this proposal has been pending for over 5 years without final implementation — but FinCEN has repeatedly stated intent to issue the final rule.

Conservative practice: file FBAR if your foreign crypto exchange balances ever exceeded $10,000 aggregate. The downside of over-filing is zero; the downside of under-filing if the rule is retroactive is high penalties.

Form 8938 (FATCA) — applies

Form 8938's definition of "specified foreign financial asset" already includes foreign financial accounts that hold crypto, and many practitioners include direct-held crypto on foreign exchanges as well. If your foreign crypto holdings push you over the FATCA thresholds ($200K single year-end / $300K single mid-year for expats), file Form 8938.

Form 8621 (PFIC) — usually no

Direct holdings of crypto are generally not PFICs. But crypto-asset funds — investment vehicles holding crypto on your behalf — likely are. A foreign-domiciled crypto ETF or pooled crypto fund is a PFIC.

Foreign country tax interactions

Most popular expat destinations have specific crypto rules:

Country	Treatment
Germany	Tax-free after 1-year hold (private sale); short-term taxed as ordinary
Portugal	Pre-2023 tax-free for individuals; 2023+ capital gains tax on short-term (under 1 year)
France	Flat PFU (30%) or progressive election
UK	Capital gains tax with annual allowance
Singapore	No capital gains tax on crypto
UAE	No personal income tax including crypto
Switzerland	Wealth tax on holdings; capital gains generally tax-free for individuals
Japan	Ordinary income rates (up to 55%) — punitive vs. most countries
South Korea	Crypto capital gains tax (delayed to 2025+ in latest legislation)

The country-specific rules don't override your U.S. obligation. Even if Germany lets you take crypto gains tax-free after a year, the U.S. still taxes you. You'd then use FTC only on the actual foreign tax paid — which is $0, so no credit available.

This is why low-tax-on-crypto countries are popular nomad destinations: at the local level you pay $0, but you still owe full U.S. capital gains tax on your dispositions. No double tax, just U.S.-only tax.

Staking, mining, airdrops, hard forks

Staking rewards

The IRS position (Rev. Rul. 2023-14): staking rewards are ordinary income at fair market value when you receive them and have dominion and control over them. A "locked" or "vesting" reward is generally not income until it unlocks.

For an expat, staking rewards on a foreign-held wallet are foreign-source ordinary income — but not earned income for FEIE purposes. They're treated like dividends/interest and can be FTC-credited in the passive basket if foreign tax was paid.

The cost basis of staked tokens = the fair market value at the time of receipt. When you eventually sell, you compute gain/loss against that basis.

Mining

Similar to staking: ordinary income at fair market value when mined, with basis equal to that value. If mining is a trade or business (vs. a hobby), it's also subject to Self-Employment tax.

Airdrops and hard forks

Both are ordinary income at fair market value when you have dominion and control over the new tokens. "Dominion and control" generally means: the tokens are in your wallet and you can move them.

DeFi: liquidity pools, lending, yield farming

The IRS hasn't issued clean guidance on most DeFi protocols. Conservative practice:

• Liquidity pool deposits: depositing into a pool is generally a taxable disposition of the deposited tokens (you traded them for LP tokens).
• Withdrawing from a pool: another disposition (LP tokens back for the underlying).
• Yield earned on lending: ordinary income when received.
• Impermanent loss vs. gain on withdrawal: ordinary capital gain/loss.

DeFi transactions in volume turn an expat return into a multi-thousand-line Form 8949. Use crypto tax software (Koinly, CoinTracker, TaxBit, Cointelli) that handles foreign exchange + DeFi. None of them are perfect; pick one and stick with it.

Filing the gains: Form 8949

Every disposition goes on Form 8949, summarized on Schedule D. For a year with hundreds or thousands of crypto trades, this is impractical line-by-line. The IRS accepts a summary statement with the trades attached as a PDF (or paper schedule), as long as:

• The summary reports total proceeds, total cost basis, and total gain/loss by short- and long-term.
• The detail is available on request.

Most crypto-tax software generates Form 8949-compatible CSV files that some tax software can import directly.

The dollar-conversion rule

Every gain/loss must be reported in U.S. dollars. Cost basis in USD at acquisition; sale price in USD at disposition. If you bought BTC for euros, you convert the euro cost basis to USD at the date-of-acquisition spot rate. Same for the sale.

This means: a euro-denominated BTC trade can produce a gain or loss for U.S. tax purposes even if the BTC price in EUR was unchanged, simply because the EUR/USD rate moved.

Lost coins, hacks, exchange failures

The 2017 Tax Cuts and Jobs Act eliminated most personal casualty and theft loss deductions through 2025. So a typical "I lost my private keys" or "my exchange got hacked" loss is generally not deductible for tax years 2018–2025.

Exceptions:

• Worthless securities deduction may apply for tokens that have demonstrably gone to zero (worth $0 with no market).
• Investment-related theft losses in a federally declared disaster area can sometimes be deducted.
• Ponzi-scheme losses under Rev. Proc. 2009-20 can be deducted, with specific requirements.

Don't claim a loss for lost coins without confirming the specific rule that applies.

What the IRS asks every year

Every Form 1040 since 2020 has had a checkbox question at the top: "At any time during the year, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?"

In 2024, this was upgraded to a broader "digital asset" question covering crypto, NFTs, and other digital assets. The answer is yes if you did anything with crypto during the year, including just buying and holding. Lying on this question is perjury.

Common crypto-tax mistakes for expats

• Forgetting crypto-to-crypto trades are taxable. Each one is a separate disposition.
• Not reporting staking/airdrop income. Ordinary income, taxable in the year received.
• Using FEIE to exclude staking income. Staking is not earned income; FEIE doesn't shelter it.
• Skipping FBAR on foreign crypto exchanges. Conservative practice: file.
• Ignoring per-wallet basis rules. For 2025 onward, you cannot pool basis across all wallets.
• Claiming crypto donations to charity without proper substantiation. $5,000+ donations need a qualified appraisal.
• Selling at year-end based on stale prices. Crypto moves fast; document the actual disposition timestamp and price.

Next steps

• Capital gains from abroad
• What is FBAR?
• What is FATCA?
• Foreign Tax Credit (Form 1116)