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ISTANBUL, TURKEY - APRIL 16: A woman walks past the entrance of a cryptocurrency exchange office on ... [+] April 16, 2021 in Istanbul, Turkey. Turkey's Central Bank announced a ban on the use of cryptocurrencies and crypto assets for purchases, directly or indirectly to pay for goods or services. The announcement comes as Turkey's crypto market has boomed over the past few years. As the Turkish Lira has slumped, many people have looked to cryptocurrencies to shelter against inflation. Cryptocurrencies gained traction globally this week after cryptocurrency exchange Coinbase launched on the New York Stock Exchange. (Photo by Chris McGrath/Getty Images)
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Cashing out and swapping cryptocurrency often involves transactions fees paid to exchanges or to the underlying protocol. These crypto transaction fees can be paid in either US dollars or in crypto currencies. If captured correctly, these fees can reduce your taxable income and save you on taxes.
Crypto transaction fees can be paid in three forms: US dollars/Fiat, cryptocurrency you are trading, a totally unrelated cryptocurrency to the trade (generally a token issued by an exchange like $BNB)
In this post, let’s first focus on crypto transactions fees paid in US dollars and how you can use them to reduce your tax bill.
Crypto Tax 101
Cryptocurrencies like Bitcoin are treated as property by the IRS (Notice 2014-21). Therefore, whenever you cash out, swap a coin with another coin, or spend coins on goods and services, such transactions result in capital gains (or losses in some cases).
For example, David had 1 Bitcoin (BTC) purchased at $20,000 (cost basis). He sold this BTC for $100,000 in 2025 in a centralized exchange. Assume the exchange did not charge a transaction fee when David cashed out. Here, David will have a gain of $80,000 ($100,000 - $20,000), which is subject to capital gain taxes.
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