The ultimate guide to crypto taxes in the US 🇺🇸

The IRS treats crypto as property, like stocks and bonds. This means that many crypto-related activities create taxable events that you must report. Learn all about it below.

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US crypto taxes explained

Types of tax in crypto

In the United States, cryptocurrency is treated as property for tax purposes, not as currency. This means that crypto transactions are subject to capital gains and income tax.

Capital gains tax (CGT)

Applies when you dispose of cryptocurrency. Some common events that trigger CGT include:

  • Profit made from selling crypto (e.g. selling BTC for USD)
  • Profits made from exchanging cryptos (e.g. selling BTC for ETH)
  • Purchasing items with cryptocurrency
  • Profits made from trading NFTs

Income tax

Comes into play when you earn cryptocurrency. Some common income tax events include:

  • Mining
  • Staking rewards and yield farming
  • Airdrops
  • Forks & airdrops
  • Salary paid in crypto

The IRS requires taxpayers to report all crypto transactions and pay the corresponding taxes, emphasizing the importance of keeping detailed records of all crypto activities. Under-reporting carries a significant risk of being audited.

DeFi Taxes

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In the U.S., decentralized finance (DeFi) isn't just a new financial frontier; it also brings unique tax obligations. Like traditional finance, but with a crypto twist, DeFi transactions attract the attention of the IRS and are subject to specific tax rules.

Some common DeFi activities that can trigger taxable events:

  • Paying gas fees
  • Paying gas fees
  • Depositing into smart contracts
  • Staking deposits
  • Earning staking rewards
  • Depositing collateral
  • Earning interest
  • Liquidity pooling
  • Earning liquidity rewards
  • Airdrops
  • Margin trading

NFT Taxes

NFT Taxes icon

In the US, non-fungible tokens (NFTs) are treated as digital assets for tax purposes, similar to other forms of cryptocurrency. This means that transactions involving NFTs can trigger tax events under capital gains and income tax laws.

Some common DeFi activities that can trigger taxable events:

  • Minting NFTs
  • Selling NFTs for fiat currency.
  • Trading an NFT for another NFT or for fungible cryptocurrency.
  • Gifting NFTs worth over $15,000 in a given year

Staking rewards

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The IRS has clarified that staking rewards are treated as income at the time of receipt, which is the time you gain dominion and control over the rewards. If you sell or dispose of the rewards in the future, you will also trigger a capital gains tax event.

Liquidity pools

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While there is a lack of specific guidance surrounding the tax implications of nuanced DeFi activities like liquidity pooling, this isn’t an excuse not to report your DeFi activity. There is enough guidance to infer how the IRS may view many situations.

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How to minimise

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your taxes

While there are many crypto activities that do trigger taxable events, there are also many transactions that don’t. If you are smart with your activities, you may be able to stick with mostly non-taxable transactions so that you don’t end up with a large tax bill.

Get a crypto tax report

Crypto taxes can be daunting. If you’ve used multiple exchanges, wallets and blockchains, then you could be facing a crypto tax nightmare.

Crypto Tax Calculator was built from the ground up to handle complex crypto transactions. Whether you’ve just dabbled in crypto or dived into DeFi and NFTs, you can seamlessly import your transactions and download CPA-approved tax reports that can be filed directly with TurboTax or shared with your accountant.

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Tax guides

NFT Tax Guide

NFT Tax Guide

Tried your hand at NFT trading? This complete guide that breaks down the details of NFT taxes in US so you can file with confidence.

Learn about NFT taxes
US Tax Guide

US Tax Guide

Unsure about your crypto tax obligations? This comprehensive guide helps you understand and file your crypto taxes in US.

Learn about US crypto taxes
DeFi Tax Guide

DeFi Tax Guide

Have you been dabbling with DeFi? This in-depth guide breaks down the details of DeFi taxes in US so you can file with confidence.

Learn about DeFi taxes

Frequently asked questions

How is cryptocurrency taxed in the US?

In the United States, cryptocurrency is treated as property for tax purposes. This means that when you sell, trade, or otherwise dispose of cryptocurrency, you must report the transaction on your tax return and potentially pay taxes on any gains. The crypto tax rate you'll face depends on how long you've held the asset: short-term gains (for assets held for less than a year) are taxed at your regular income tax rate, while long-term gains (for assets held for more than a year) benefit from reduced tax rates.  There isn’t a specific crypto tax form, so to report these transactions, you'll need to use Form 8949 to calculate your capital gains or losses and transfer this information to Schedule D of your tax return. It's also worth noting that cryptocurrency taxes extend to mining, payment for goods or services, airdrops, staking and other income, which must be reported on your tax return as well. To simplify cryptocurrency tax reporting and ensure accuracy, many turn to cryptocurrency tax software, like Crypto Tax Calculator, which can help organize crypto transactions and calculate taxes owed.

Are crypto losses tax deductible?

Yes, crypto losses are tax deductible in the US. If you sell cryptocurrency for less than what you paid for it, you can use the loss to offset your capital gains from other investments or up to $3,000 of income ($1,500 if married filing separately) if you don't have capital gains. Any losses exceeding this limit can be carried forward to future tax years.  There is no specific crypto tax form, so you'll need to report these losses on Form 8949 and Schedule D of your federal income tax return to claim them. This process involves detailing each transaction's cost basis, sale proceeds, and gain or loss. Using crypto tax software, such as Crypto Tax Calculator, can help you reduce your overall tax liability by accurately reporting your crypto losses.

How to report crypto on taxes

Reporting cryptocurrency on your taxes involves detailing each transaction that constitutes a taxable event, such as selling, trading, or spending cryptocurrency, as well as earning it through mining or as payment. There is no specific crypto tax form, so to file your crypto taxes you’ll use Form 8949 to list each transaction, including the date acquired, date sold, cost basis, proceeds, and gain or loss.  The totals from Form 8949 are then transferred to Schedule D of your tax return, where your total capital gains and losses are calculated. For those using tax software, Crypto Tax Calculator offers tax software integrations, like TurboTax and TaxAct, as well as pre-filled From 8949 and Schedule D, which streamlines the process by automatically calculating gains and losses.

Do I have to pay taxes on crypto gains?

Yes, in the US, you are required to pay taxes on crypto gains. Any profit you realize from selling, trading, or disposing of cryptocurrency is subject to capital gains tax. The rate at which you are taxed depends on how long you've held the cryptocurrency: short-term capital gains (for assets held for less than a year) are taxed at your ordinary income tax rates, while long-term capital gains (for assets held for more than a year) are taxed at lower rates.  To report and pay taxes on crypto gains, there is no specific crypto tax form, so you'll need to use Form 8949 to document each transaction's specifics and calculate your gain or loss, then summarize this information on Schedule D of your tax return. Crypto Tax Calculator provides both of these forms pre-filled to save you time and ensuring accuracy when filing your crypto taxes. Reporting your crypto transactions accurately is crucial to comply with IRS regulations and avoid potential penalties.

Contents

  • 1.Crypto taxes explained
  • 2.Types of crypto taxes
  • 3.DeFI Taxes
  • 4.NFT Taxes
  • 5.Getting a crypto tax report
  • 6.Frequently asked questions
  • 7.Get started

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