Can You Tax Crypto?
Yes, cryptocurrency can be taxed. The IRS treats crypto as property, meaning any sale, trade, or transaction involving cryptocurrency is a taxable event. Capital gains or losses must be reported on your tax return, and income earned through crypto is subject to ordinary income tax.
Key Taxable Events:
- Selling crypto for fiat currency (e.g., USD): Subject to capital gains tax.
- Trading one cryptocurrency for another: Treated as a taxable event.
- Using crypto for goods or services: Any appreciation in value is taxable.
- Receiving crypto as income: Taxed as ordinary income based on its fair market value.
Tax-Free Crypto Transactions:
Certain crypto-related activities are not taxable, including:
- Buying and holding cryptocurrency.
- Transferring crypto between your own wallets.
Crypto Income Tax Rates (2024)
| Income Type | Tax Rate |
| Short-term capital gains (held <1 year) | Same as ordinary income tax rates (10%-37%) |
| Long-term capital gains (held >1 year) | 0%, 15%, or 20%, depending on your income |
| Cryptocurrency received as salary | Taxed as ordinary income (10%-37%) |
Frequently Asked Questions
1. Do I pay taxes when I sell crypto for a profit?
Yes, you must report capital gains or losses when you sell cryptocurrency for fiat currency.
2. Is receiving crypto as payment taxable?
Yes, crypto received as income is taxed as ordinary income based on its fair market value at the time of receipt.
3. Is transferring crypto between my wallets taxable?
No, transferring cryptocurrency between wallets is not considered a taxable event.
4. How do I report crypto on my taxes?
Report capital gains/losses on Form 8949 and transfer totals to Schedule D. Report crypto income on Form 1040.
5. What happens if I don’t report crypto taxes?
You may face IRS penalties, interest, and audits if you don’t report taxable crypto events.
6. Are crypto gifts taxable?
No, gifting crypto isn’t taxable, but recipients may owe taxes if they sell it later.
