Get an overview of crypto taxation and understand your tax obligations related to cryptocurrency trading.
Yes, the Internal Revenue Service (IRS) treats cryptocurrencies as property, and any gains or losses from cryptocurrency transactions are subject to taxation.
A taxable event occurs when you sell, trade, exchange, or dispose of your cryptocurrency. It also includes using cryptocurrencies to purchase goods or services.
Cryptocurrencies are subject to capital gains tax. The tax is calculated based on the fair market value of the cryptocurrency at the time of the transaction and the cost basis (usually the purchase price). The difference between the two determines the capital gain or loss.
The IRS distinguishes between short-term and long-term capital gains based on the holding period. If you hold the cryptocurrency for one year or less before selling, it is considered a short-term capital gain or loss. If you hold it for more than one year, it is considered a long-term capital gain or loss. Long-term gains generally have lower tax rates.
Yes, you are required to report every cryptocurrency transaction, including buying, selling, trading, and even converting one cryptocurrency to another.
Yes, if you receive more than $10 in cryptocurrency as income or if you have more than $200 in gains or losses from crypto transactions, you must report it on your tax return. Even if you don't meet these thresholds, it is still recommended to report your transactions for accurate record-keeping.
Yes, you can offset your capital gains by deducting capital losses. If your losses exceed your gains, you may be able to deduct the remaining losses from your overall taxable income, subject to certain limitations.