How is Cryptocurrency Taxed?
Cryptocurrency is classified as property under U.S. federal tax law, meaning taxable events occur when you sell, trade, or dispose of crypto for profit or loss. Below are key aspects of crypto taxation:
Types of Taxable Events
- Selling for Fiat Currency: Gains/losses from converting crypto to USD or other fiat are taxable.
- Crypto-to-Crypto Trades: Exchanging one cryptocurrency for another (e.g., Bitcoin for Ethereum) triggers capital gains tax on the disposed asset.
- Purchasing Goods/Services: Using crypto as payment incurs taxes based on the value difference between cost basis and fair market value at purchase time.
- Crypto Income: Mining, staking, airdrops, or payment in crypto are taxed as ordinary income at fair market value upon receipt.
Crypto Tax Rates Explained
Tax rates depend on holding periods:
- Short-Term (≤1 year): Taxed at ordinary income rates (10%–37%).
- Long-Term (>1 year): Lower capital gains rates (0%, 15%, or 20%).
| Holding Period | Tax Rate | Income Bracket (Single Filers) |
|---|---|---|
| Short-Term | 10%–37% | $0–$609,350 |
| Long-Term | 0%–20% | $0–$518,900 |
2024 Tax Brackets Breakdown
Short-Term Capital Gains (Ordinary Income Rates)
| Rate | Single Filers | Married (Joint) |
|---|---|---|
| 10% | $0–$11,600 | $0–$23,200 |
| 12% | $11,601–$47,150 | $23,201–$94,300 |
| 22% | $47,151–$100,525 | $94,301–$201,050 |
| 24% | $100,526–$191,950 | $201,051–$383,900 |
Long-Term Capital Gains
| Rate | Single Filers | Married (Joint) |
|---|---|---|
| 0% | $0–$47,025 | $0–$94,050 |
| 15% | $47,026–$518,900 | $94,051–$583,750 |
| 20% | >$518,900 | >$583,750 |
IRS Crypto Reporting Guidelines
- Form 8949 & Schedule D: Report sales/trades detailing acquisition dates, cost basis, and proceeds.
- Income Reporting: Mining/staking rewards require Form 1040 inclusion at fair market value.
- Non-Taxable Events: Transfers between personal wallets or holding crypto incur no taxes.
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Frequently Asked Questions
1. Is crypto taxed like stocks?
Yes, both are treated as property with capital gains taxes based on holding periods.
2. How are mining rewards taxed?
As ordinary income at the crypto’s value when received.
3. Can I deduct crypto losses?
Yes, up to $3,000 annually against ordinary income.
4. What if I don’t report crypto taxes?
Penalties, interest, or audits may apply.
5. Are crypto donations tax-deductible?
Yes, if given to qualified charities at fair market value.
👉 Learn more about crypto tax strategies.
Disclaimer: Tax laws change frequently. Always verify with the IRS or a tax professional.
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