Beginner Guide
Cost Basis
DeFi + NFTs
Updated: Feb 2026 • Educational overview (not tax advice)
Crypto Taxes for Beginners: the simple guide to avoid mistakes
Most people don’t get in trouble because they “did something wrong” — they get burned because their data is messy:
missing cost basis, transfers labeled as sells, or DeFi/NFT activity categorized incorrectly.
This guide explains the basics and shows the fastest path to a clean, CPA-ready report.
Tip: If there’s a current discount or special offer, you’ll see it after clicking through.
1) Crypto tax basics (in plain English)
Crypto taxes usually come down to two buckets:
- Capital gains/losses when you dispose of an asset (sell/swap/spend).
- Income-like events when you receive crypto (some rewards/airdrops, depending on rules).
The “hard” part is not the tax forms — it’s building an accurate history that correctly matches buys, sells, swaps, and transfers.
That’s why cleanup (cost basis + transfers + labeling) matters so much.
2) What’s usually taxable in crypto
Rules vary by location and circumstances, but these are common triggers:
- Selling crypto for fiat.
- Swapping crypto (crypto-to-crypto trades).
- Spending crypto (using it to buy something can count as a disposal).
- Rewards / yield (staking, incentives, some airdrops).
- DeFi/NFT activity that behaves like swaps, income, or disposal events.
A simple wallet-to-wallet transfer is often not taxable by itself — but it’s frequently misclassified if wallets are missing or unlabeled.
3) Cost basis: why “unknown cost basis” can inflate taxes
Cost basis is what you paid for an asset (and sometimes fees). Your gain is roughly:
proceeds − cost basis.
If software shows unknown cost basis, it may assume $0 (worst case), which makes your gains look huge.
That can cause you to overpay or file an inaccurate return.
4) Why DeFi + NFTs make crypto taxes harder
DeFi and NFT activity can create data that doesn’t map neatly into “buy” and “sell”:
- Bridges can look like sends/receives without a clear match.
- LP tokens can look like swaps and disposals.
- Staking/yield farming can generate many small income-like events.
- NFT mints/sales may involve multiple fees, royalties, and marketplace contracts.
If your report looks “off,” the fastest path is often to clean the history (match transfers + label activity + reconcile cost basis) before filing.
5) Quick prep checklist before you file
- List every exchange + wallet you used (missing one creates gaps).
- Confirm transfers are matched (A → B should link).
- Scan for unknown cost basis and fix it before filing.
- Review DeFi/NFT categorization (bridges/LPs/mints often need cleanup).
- Export CPA-ready reports or share summaries with your tax pro.
6) How to file crypto taxes (high-level steps)
If you want the full step-by-step process, use your hub guide here:
/file-crypto-taxes/.
- Collect records from exchanges + wallets.
- Reconcile transfers so moves don’t look like sells.
- Verify cost basis to avoid inflated gains.
- Generate reports (gains/losses + income) and provide to your tax pro or filing software.
If you traded a lot (or did DeFi/NFTs), the fastest win is accuracy — a clean history now prevents painful rework later.
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FAQ
Do I owe taxes if I only bought and held crypto?
Often, simply buying and holding isn’t taxable by itself. Taxes typically arise when you dispose of an asset (sell/swap/spend) or receive income-like crypto (rewards/airdrops depending on rules).
Why does my report show huge gains when I didn’t profit?
This is commonly caused by missing cost basis or transfers being treated as sells. Fixing unknown cost basis and matching transfers usually corrects inflated gains.
Is this tax advice?
No. This is educational information. Tax rules vary by jurisdiction and personal situation. For advice, speak with a qualified tax professional.