Understanding Crypto Taxes

How is crypto taxed in the U.S.? Your guide to this tax season

U.S. taxpayers are required to report crypto sales, conversions, payments, and income to the IRS, and state tax authorities where applicable, and each of these transactions has different tax implications. In this article, you'll learn when your crypto is taxed and how your activity might affect your taxes.

Do I owe crypto taxes?

In the U.S., crypto is considered a digital asset, and the IRS treats it like stocks, bonds, and other capital assets. Transactions that result in a tax are called taxable events. Those that don’t are non-taxable events.

Not taxable

-Buying crypto with cash and holding it

-Donating crypto to a qualified tax-exempt charity

-Receiving a gift

-Giving a gift up to IRS limits

-Transferring crypto to yourself

Taxable as capital gains

-Selling crypto for cash

-Converting one crypto to another

-Spending crypto on goods and services

Taxable as income

-Getting paid in crypto

-Getting crypto for goods or services

-Mining crypto

-Earning staking rewards

-Earning rewards from holding crypto

-Getting crypto from a hard fork or airdrop

-Receiving other incentives or rewards

How much do I owe in crypto taxes?

You can estimate how much you’ll owe in taxes by calculating your income, gains, and losses.

Calculating crypto income

Crypto received as income (e.g., mining, staking) is taxed based on its fair market value at the time it was received.

Calculating capital gains and losses

Your cost basis is the original value of the crypto. Gains and losses are calculated by comparing this basis to the sale price.

Short-term vs. long-term gains

Crypto held for more than a year is taxed at a lower long-term capital gains rate. Otherwise, it is taxed at your ordinary income rate.

Understanding capital losses

Capital losses can offset gains. You can deduct up to $3,000 in net losses per year against other income. Excess losses carry forward.

Additional Tips

Always consult a tax professional for advice tailored to your specific situation.