Are Crypto Gains Taxed?

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Since 2014, the IRS has made clear its position on cryptocurrency gains; any profits you earn from selling or trading digital currency must be taxed as capital gains. If your cryptocurrency earnings come from mining, staking, airdrops, or hard forks, you may also need to file additional forms with the IRS.

Are Crypto Gains Taxed? Buying cryptocurrency isn't subject to tax, but selling it will incur capital gains taxes. A capital gain refers to any difference between what was paid when purchasing and selling, such as its current market price.

If you hold on to cryptocurrency for more than one year before selling it, its gains are taxed at a lower long-term capital gains rate. Any proceeds you receive upon selling them within 12 months are considered short-term capital gains and taxed as ordinary income.

There are two different tax forms - 1099-K and 1099-B - used to report cryptocurrency activity and calculate your capital gains taxes due. Your exchange may provide one of these documents in order to report your activity, so use it to calculate what capital gains taxes may be due for transactions you've done.

Starting in 2023, exchanges must provide their users with an IRS form 1099-B or 1099-K, depending on their activity level. These forms detail your annual sales volume of crypto assets and can help calculate your tax liability from these transactions.

Tax-loss harvesting can help lower your tax liability by selling assets at a loss during periods of market downturns or at year's end to offset other gains and reduce your taxable gains. If you need help taxing crypto gains, consult an experienced tax professional.

The IRS is ramping up its enforcement of cryptocurrency, forcing many who profit from them to pay more taxes than planned. It can be an intricate process with many rules involved that can prove perplexing if you're unfamiliar with them.

Typically, the IRS taxes cryptocurrency similar to property or investments. If you hold it for over one year, long-term capital gains tax rates range from 0%-20% until 2022.

Notably, your long-term capital gains rate should take into account all transactions, not just those that were sold, to prevent double taxation arising from having paid tax upon purchasing cryptocurrency and then having to pay more when selling it off later on.

Assuming you aren't actively trading crypto, the IRS might frown upon any significant gains you make when selling off coins, so ideally, it would be prudent to hold onto them until necessary and only sell when needing cash; doing so can prevent incurring an enormous tax bill.

Are Crypto Gains Taxed?

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