California Crypto Tax: FTB Rules and Choosing an Accountant

Short answer: California taxes crypto gains as ordinary income. The FTB says California does not have a lower rate for capital gains, so long-term crypto gains get no state discount. The state return starts from your federal figures, and a crypto accountant anywhere in the US can prepare the report your California preparer files from.

If you live in Los Angeles, San Francisco or anywhere else in California, your crypto is taxed twice over: once on the federal return and again on the state return. The federal rules decide what counts as a gain, a loss or income. California then taxes that result at its own rates, with a few differences that matter more to crypto investors than most people expect.

This guide is for a California resident deciding what the state adds to their crypto tax picture and who should help with it. I am Chris Herbst, founder of CountDeFi. We are US crypto tax accountants: we reconcile crypto histories and produce the reports a client's own CPA or preparer files from. We are not a CPA firm and we do not file returns. I am a Chartered Business Accountant in Practice (CBAP) with the Chartered Institute for Business Accountants and a General Tax Practitioner (GTP) with the South African Institute of Taxation.

How California Taxes Crypto Gains and Income

California has no separate crypto tax. Crypto is caught by the same income tax that applies to wages, interest and stock sales, and the starting point is the federal treatment.

Is crypto property in California, as it is federally?

Federally, the IRS says digital assets are considered property, not currency. The California return is built from the federal one: the Form 540 instructions tell you to use information from your federal income tax return to complete your Form 540. So the gains, losses and income your federal crypto report produces are the figures California starts from, unless a California adjustment applies.

Does California tax long-term crypto gains at a lower rate?

No. The FTB's capital gains page is direct: All capital gains are taxed as ordinary income. Federally, crypto held for more than a year can qualify for the lower long-term rates. In California, a gain on bitcoin held for five years is taxed at the same rates as a gain on bitcoin held for five days, and both are taxed like salary.

How is crypto income taxed in California?

Staking rewards, mining income, airdrops that are income, and crypto received for work are income federally at their US dollar value when received. That same income flows into California taxable income and is taxed at the state's ordinary rates. When the rewards are later sold, the sale is a capital gain or loss on both returns, measured from the value at which the income was recorded.

Is there an extra California tax on very large gains?

Yes, at the top end. The Form 540 instructions apply a Behavioral Health Services Tax of 1% on taxable income above $1,000,000. A single large crypto sale can push a year over that line even when your usual income does not come close, which is one reason the timing of large disposals is worth discussing with your preparer before the sale, not after.

Federal and California Crypto Tax Side by Side

Most of the work is federal. California changes the rate and a handful of rules, and the table shows where the two returns agree and where they part.

What the California Return Needs From Your Crypto Report

A good federal crypto report does most of the California work, because the state return inherits its figures. The questions are whether any California difference exists and whether the report is right in the first place.

Do I file a separate California Schedule D for crypto?

Usually not. The Schedule D (540) instructions say to use the form only if there is a difference between your California and federal capital gains and losses. If your crypto gains are the same on both returns, the federal Schedule D figures carry through and no separate state schedule is needed. The federal side is where the detail lives: since the 2025 Form 8949, digital asset sales have new boxes G, H, and I for short-term digital asset transactions and J, K and L for long-term ones. Our guide to Form 8949 and Schedule D for crypto walks through them.

When would my California crypto figures differ from federal?

The most common reason for a crypto investor is a move into or out of the state, which changes what California can tax. Another is a capital loss carryover built up while you lived elsewhere: the Schedule D (540) instructions say that if you were a nonresident during a year that generated part of the carryover, you recalculate your 2024 capital loss carryover as if you resided in California for all prior years. Both are worth flagging to your preparer early.

How much crypto loss can I deduct in California?

If your capital losses exceed your gains, Schedule D (540) allows the smaller of the loss on line 8 or $3,000 ($1,500 if you are married or an RDP filing separately) against other income for the year, with the rest carried forward. Harvested crypto losses therefore help on both returns, within the limit. Our guide to crypto tax-loss harvesting covers how losses are realised and recorded.

Does Form 1099-DA change anything for California?

Brokers report digital asset sales on Form 1099-DA beginning with transactions on or after Jan. 1, 2025. The form is federal, but the figures it feeds are the same ones California inherits. If the 1099-DA shows proceeds with missing or wrong basis, that error flows into both returns unless your report corrects it. Our guide to what Form 1099-DA means for your return explains how to reconcile it.

Residency: Moving Into or Out of California With Crypto

For crypto investors, residency is the California question with the most money attached. Residents are taxed on everything; nonresidents are taxed only on California-source income.

Who counts as a California resident?

The FTB says you are a resident if you are present in California for other than a temporary or transitory purpose, or domiciled in California but outside it for a temporary or transitory purpose. Residents are taxed on all income regardless of source, so a California resident's gains on an offshore exchange or a self-custody wallet are taxable in California like any other gain.

How long can I spend in California before I am presumed a resident?

FTB Publication 1031 says you will be presumed to be a California resident for any taxable year in which you spend more than nine months in this state. Fewer days do not make you a nonresident on their own: the publication weighs your connections, such as your home, family, work and accounts, to decide where your closest connections are.

Does selling crypto right after leaving California avoid state tax?

Not automatically, and it is the question to settle before the sale. Publication 1031 says the gain or loss from the sale of stocks or bonds has a source where you are a resident at the time of the sale. It does not name digital assets, and the FTB looks hard at whether a move is real or temporary. If a large disposal is planned around a move, take advice from a California preparer or tax attorney first, and keep dated records of the move itself. Our guide on moving abroad to cut US crypto tax covers the federal side of the same question.

Do part-year residents file differently?

Yes. A part-year resident or nonresident with a filing requirement files Form 540NR rather than Form 540. Publication 1031 explains that nonresidents and part-year residents determine their California tax by multiplying their California taxable income by an effective tax rate, so the year of a move needs the crypto report split by date: which disposals happened while you were a resident and which after.

Finding Crypto Tax Help in Los Angeles and San Francisco

Searching for a crypto accountant in Los Angeles or San Francisco usually returns local firms first. Location is worth less than it looks for crypto work, and a little more than it looks for the state return.

Do I need a crypto accountant based in California?

For the crypto report, no. Reconciling exchanges, wallets and DeFi activity is done on data, and the federal rules that decide your gains are identical in every state. For the California return itself, the person signing it should know California's adjustments, residency rules and forms. Our guide to whether a crypto tax accountant near you matters covers this in more depth.

Who is allowed to prepare my California return for a fee?

California is stricter than most states. The FTB says California law requires anyone who prepares tax returns for a fee, and is not an exempt preparer, to register as a tax preparer with the California Tax Education Council (CTEC). The exempt preparers are California CPAs, enrolled agents, California State Bar attorneys and specified banking or trust officials. Ask anyone preparing your return which of those they are.

How do I check a California CPA's licence?

The California Board of Accountancy lets you search for any California CPA or accounting firm to see their licence status and any disciplinary action. Check before you sign an engagement letter. Our comparison of a crypto CPA and a crypto tax accountant explains when you need the licence and when you need the reconciliation skills.

What does a crypto tax accountant do that my California preparer may not?

Many good California preparers are not set up to rebuild a crypto history: matching transfers between your own wallets, finding missing cost basis, reading DeFi pools and staking, and tying the result to a 1099-DA. A crypto tax accountant does that work and hands your preparer a reconciled report. Our guide to who prepares crypto tax reports for your CPA describes the handover.

What To Prepare Before Your California Crypto Return

The same preparation serves both returns, with a few additions for California.

Which records should I gather?

• Every exchange account you used, including closed ones, with full-history exports.
• Every self-custody wallet address, on every chain it was used on.
• Any Form 1099-DA, 1099-MISC or 1099-B you received.
• Records of staking, mining or other crypto income with the US dollar value when received.
• Your prior-year federal and California returns, including any capital loss carryover on each.
• If you moved, the dates you arrived in or left California and evidence of the move.

The IRS asks you to keep records that document your purchase, receipt, sale, exchange or any other disposition of the digital assets, and California's figures rest on the same records. If basis is missing from older purchases, our guide to fixing missing cost basis explains how it is rebuilt.

When is the California return due?

The 2025 Form 540 instructions say to complete and mail Form 540 by April 15, 2026. A return filed after October 15, 2026 incurs a late filing penalty plus interest from the original due date, and tax not paid by April 15 incurs a late payment penalty either way. Leave room for the crypto report: it has to be finished before either return can be.

Where CountDeFi Fits for California Investors

CountDeFi is Koinly's #1 Global Partner. We import a client's exchanges, wallets and chains, reconcile every transaction, fix the errors software leaves behind, and produce the reports your CPA, enrolled agent or CTEC-registered preparer uses to file both returns. We do not file returns and we do not give investment advice.

For a California client, that means a federal crypto report whose figures your preparer can carry into Form 540, and, in a year you moved, a report your preparer can split by residency date. If you are still choosing tools rather than people, our guide to how to choose crypto tax software covers when software alone is enough. If you want the reconciliation done for you, see our crypto tax accounting service.