You can sell Bitcoin for cash through three legal channels in the United States: a centralized exchange, a peer-to-peer platform, or a Bitcoin ATM. All three require some level of identity verification, and all three create a taxable event with the IRS. What changes wildly between them is the price of convenience. Fees run under 1% on a major exchange and can hit 20% at a Bitcoin ATM, so the method you pick often matters more than the market price on the day you sell.
What You Need Before You Start
Every regulated platform will ask for a government-issued photo ID (driver’s license or passport) and, in most cases, your Social Security number. These checks come from the Bank Secrecy Act’s customer identification rules that apply to money services businesses handling digital assets.1FFIEC BSA/AML Manual. Assessing Compliance with BSA Regulatory Requirements – Customer Identification Program
You also need access to the Bitcoin itself, meaning either the private key to your self-custody wallet or the login for the exchange holding it. And you need somewhere for the money to land. Most platforms want a linked bank account (routing and account numbers). Some also support PayPal, Venmo, or direct cash payout. Getting all of that lined up first saves you from stalling mid-sale while verification catches up, which can take anywhere from a few minutes to a couple of days.
Selling on a Centralized Exchange
An exchange like Coinbase, Kraken, or Gemini is the standard route. If your Bitcoin already sits on the exchange, you go straight to the trade screen. If it’s in your own wallet, you first send it to the exchange’s deposit address; that deposit usually clears in 15 to 60 minutes depending on network traffic.
You then have two order types. A market order sells right away at whatever price is currently on offer. A limit order sets a minimum price and only executes if the market reaches it. Limit orders give you control but may sit unfilled in a fast-moving market. Once your order fills, the dollars show up as a cash balance in your account.
Moving that balance to your bank is the last step. ACH withdrawal is free on most platforms, though the exchange’s own processing adds time on top of standard ACH settlement. Coinbase quotes 3 to 5 business days for ACH.2Coinbase Help. USD ACH Withdrawals Wire transfers arrive within a business day but cost $15 to $50. Some platforms offer instant debit card withdrawals for a small percentage fee.
Trading fees on major exchanges run from 0% to 0.40% per trade, sometimes structured as maker/taker tiers. On a $5,000 sale at 0.20%, the fee is about $10.
Selling Peer-to-Peer
Peer-to-peer platforms match you directly with a buyer, usually at a price you set. Sellers often add a small premium above market to cover the effort and risk. When a buyer accepts, the platform locks your Bitcoin in escrow until you confirm payment has landed.3Binance Blog. How Does Binance P2P Escrow Service Work Payment itself happens outside the platform: bank transfer, Zelle, Venmo, or an in-person cash meeting. Once the funds show up in your account, you release the Bitcoin.
How to Avoid Getting Scammed
The single biggest risk is releasing coins before you’ve truly been paid. A screenshot is not proof of payment. Open your banking or payment app and confirm the money has cleared and is available. Scammers sometimes pay from stolen accounts or cards, and those transactions reverse days later. Only accept payment from an account name that matches the buyer’s verified name. Don’t release Bitcoin under time pressure. Be wary of anyone offering well above market for no clear reason. If a trade goes wrong, report it to the platform and to the FTC.
When Regular P2P Selling Becomes a Business
One boundary worth knowing. If you sell Bitcoin peer-to-peer on a regular basis, FinCEN may treat you as a money transmitter, which is a type of money services business. There is no dollar-volume floor. If you’re in the business of transferring funds, the rules apply.4FinCEN. Money Services Business (MSB) Registration That means federal registration (FinCEN Form 107) and state money transmitter licensing in most states. Selling your own holdings a few times a year won’t trigger it. Running what amounts to an exchange through P2P platforms will.
Selling at a Bitcoin ATM
Bitcoin ATMs, sometimes called BTMs, are walk-up kiosks that dispense physical cash for Bitcoin. You choose “sell” on the touchscreen, enter your phone number for a verification code, and the machine shows a QR code for its wallet. You scan it with your mobile wallet, send the Bitcoin, and wait for blockchain confirmation, usually 10 to 30 minutes. Many machines print a voucher or code you bring back to collect the cash.
Daily limits vary. Some kiosks cap withdrawals at a few hundred dollars with phone-only verification. Others allow up to $25,000 per day once you’ve done full ID verification. Check the specific machine’s limits before you send any Bitcoin.
Now the warning. Bitcoin ATMs charge far more than any other method. Federal Reserve Bank of Kansas City research puts the median BTM fee at 15% of the transaction, and once you add the exchange rate markup (typically 5% to 7% above market), total costs of 20% are common.5Federal Reserve Bank of Kansas City. The Controversial Business of Cash-to-Crypto Bitcoin ATMs On a $1,000 sale, that’s roughly $200 gone. Unless you specifically need paper cash immediately, another method saves you a lot.
Which Method Costs the Least
The gap between methods is wide enough to change your decision:
- Centralized exchanges: 0% to 0.40% trading fee, plus up to $50 for a wire withdrawal or $0 for ACH. On a $5,000 sale, roughly $0 to $20.
- Peer-to-peer platforms: often no trading fee, though effective price depends on buyer demand. Some platforms charge a 0.5% to 1% escrow fee.
- Bitcoin ATMs: combined fees and markups of 15% to 20%. On a $5,000 sale, $750 to $1,000.5Federal Reserve Bank of Kansas City. The Controversial Business of Cash-to-Crypto Bitcoin ATMs
Speed runs in the opposite direction. A BTM gives you cash in minutes. A P2P sale settles in hours. An exchange withdrawal takes 1 to 5 business days depending on the rails. The convenience premium at a kiosk is real, and it’s enormous.
Taxes You’ll Owe on the Sale
The IRS treats Bitcoin as property, not currency.6Internal Revenue Service. Digital Assets Every sale is a taxable event. Your gain (or loss) is the sale price minus your cost basis, which is what you originally paid including any transaction fees. Report each sale on Form 8949 and carry the totals to Schedule D of Form 1040.7Internal Revenue Service. Instructions for Form 8949 (2025)
Short-Term vs. Long-Term Rates
How long you held the Bitcoin controls the rate. Held more than one year, you pay long-term capital gains rates: 0%, 15%, or 20% depending on your taxable income. For 2026, single filers hit the 15% rate above $49,450 in taxable income and the 20% rate above $545,500. Married filing jointly, the 15% rate starts at $98,900 and 20% at $613,700.
Held one year or less, you pay short-term rates, which match your ordinary income bracket and can run as high as 37%. The difference between selling at 11 months versus 13 months can be dramatic on a large gain. Higher earners may also owe an additional 3.8% net investment income tax on capital gains if modified adjusted gross income exceeds $200,000 single or $250,000 joint.8Internal Revenue Service. Topic No. 559 – Net Investment Income Tax
Cost Basis if You Bought in Batches
If you bought Bitcoin at different prices over time, which specific units you’re “selling” affects your gain. The IRS default is FIFO (first in, first out), so your earliest purchases are treated as sold first. You can instead use specific identification and designate exactly which units, but under rules that took effect in 2025 you have to make that choice at the time of the trade. You can no longer switch retroactively. If you want to use a highest-cost-first approach to minimize taxable gains, set it up with your exchange or in your records before you sell.
The IRS Now Sees Your Sales
Skipping tax reporting is a worse bet every year. Starting in 2025, crypto brokers began issuing Form 1099-DA, which reports your sale proceeds (and in some cases cost basis) to you and to the IRS.9Internal Revenue Service. Understanding Your Form 1099-DA The agency has transaction-level data on your sales. Willful tax evasion under 26 U.S.C. 7201 is a felony with fines up to $100,000 and up to five years in prison.10Office of the Law Revision Counsel. 26 USC 7201 – Attempt to Evade or Defeat Tax Even honest underreporting brings interest and penalties. Keep records of every purchase date, price, and fee from the moment you buy.
Cash Payments Over $10,000
If you receive more than $10,000 in physical cash from a single Bitcoin sale, or from related transactions, the payer in a trade or business context must file IRS Form 8300 within 15 days.11Internal Revenue Service. Form 8300 and Reporting Cash Payments of Over $10,000 This applies to in-person cash deals and to Bitcoin ATM transactions above the threshold. The filer also sends you a written statement by January 31 of the following year and keeps a copy for five years. Splitting a sale into smaller pieces to duck this reporting requirement is itself a federal crime, so don’t try it.