Understand cryptocurrency taxation

U.S. taxpayers must report cryptocurrency sales, conversions, payments, and income to the IRS and applicable state tax agencies, and each transaction has different tax implications. In this article, you will learn when your cryptocurrency is taxed and how your activities affect your taxes. Let\'s get started.

Do I need to pay cryptocurrency tax?

In the United States, cryptocurrencies are considered digital assets, and the Internal Revenue Service (IRS) typically treats them like stocks, bonds, and other capital assets. Similar to these assets, the funds you get from cryptocurrency are taxed at the capital gains or income tax rate based on how you obtained the cryptocurrency and how long you hold it.

To understand whether you need to pay taxes, it is important to check how you use cryptocurrency. Transactions that result in a tax being paid are called taxable events, while transactions that do not result in a tax being called non-taxable events. Let\'s break it down:

No tax

Buying and holding cryptocurrency with cash: Simply buying and holding cryptocurrency does not require tax per se. Typically, taxes will be generated when you sell and the proceeds will be \"realized\".

Donate cryptocurrency to eligible tax-exempt charities or non-profit organizations: If you donate cryptocurrency directly to a 501(c)(3) charitable organization, such as GiveCrypto.org, you may receive a deduction for charitable donations.

Received a gift: If you are lucky enough to receive cryptocurrency as a gift, you may not pay taxes before selling or engaging in other taxable activities such as pledging.

Gifts: How thoughtful! In 2024, you can give gifts of up to $18,000 per recipient per year without paying taxes (your spouse can give a higher amount), and in 2025, this will increase to $19,000 per recipient. If your gift exceeds these limits, you will need to file a gift tax return (which will usually not result in a current tax burden). If you transfer cryptocurrency to someone else rather than using it to purchase goods or services, this may be considered a gift, even if you did not intend to.

Transfer cryptocurrency to yourself: There is no tax requirement to transfer cryptocurrency between wallets or accounts you own. You can move beyond the original cost base and purchase date to continue to track the potential tax impact of your final sale.

Taxing as capital gains

Selling cryptocurrencies for cash: Have you sold cryptocurrencies as U.S. dollars? If the value of the asset you sell exceeds the cost of your purchase, you will need to pay taxes. If you sell at a loss, you may be able to deduct the loss on your tax return.

Convert one cryptocurrency to another: For example, when you buy ether with Bitcoin, technically you have to sell your Bitcoin before you can buy new assets. Because this is a transaction, the IRS treats it as taxable. If you sell Bitcoin at a price higher than the purchase cost, you will have to pay taxes.

Using cryptocurrency on goods and services: For example, if you buy pizza in Bitcoin, you may need to pay taxes on the transaction. For the Internal Revenue Service (IRS), using cryptocurrency is not much different from selling it. You need to sell the asset first to exchange it for goods or services, while selling cryptocurrencies makes it subject to capital gains tax.

Taxes as income

Get remuneration with cryptocurrency: If you pay for cryptocurrency by your employer, your cryptocurrency will be taxed as remuneration based on your income tax rate.

Exchange cryptocurrency for goods or services: If you accept cryptocurrency as a payment method for goods or services, you need to report it to the IRS as income.

Mining cryptocurrencies: If you mine, you may pay income tax on your income based on the fair market value (usually the price) of the cryptocurrency mined at the time of receipt. Cryptocurrencies mined as a business are taxed on self-employment income.

赚取质押奖励：质押奖励被视为采矿收益：税收基于您收到奖励当天的公允市场价值。关于质押的ETH的特别说明：当Coinbase客户能够解除质押时（无论用户选择解除质押还是继续质押），质押的ETH所赚取的收入将被视为应税收入，因此能够控制这些奖励。

获得其他收入：您可能通过持有某些加密货币（如美元币）获得奖励。这被视为应税收入。此外，仅持有cbETH也会产生应税收入。

从硬分叉中获得加密货币：您从硬分叉中获得的加密货币的税收取决于您如何使用该资产、何时可以从交易所提现等。查看最新的美国国税局关于硬分叉的指导。

获得空投：您可能会收到加密货币公司通过营销活动或赠品发放的空投。获得空投将被视为收入纳税，您需要申报相应金额。查看美国国税局(IRS)关于空投的最新指南

获得其他激励或奖励：此列表并不详尽——您可能因各种原因而获得免费加密货币。这些奖励可能包括学习奖励，或例如推荐朋友使用加密货币交易所即可获得价值5美元的比特币等奖励。无论如何，您都需要将这些奖励申报为收入。

我需要缴纳多少加密货币税？

Looks like you need to pay taxes on some of your cryptocurrency activities-what should you do now? You can estimate the amount of taxes you will need to pay by calculating your income, gains and losses. This means:

Calculate cryptocurrency income

If you are a U.S. taxpayer, you may be used to seeing your federal and state income taxes deducted on your payroll. The cryptocurrency you receive as income (such as mining, pledges and rewards) is also subject to the same income tax laws and is usually not deducted or withheld. When you declare income, you usually need to pay taxes based on the income tax rate that suits your tax bracket. One thing to note: If you earn a lot of income through cryptocurrency activities, this may affect your tax bracket and may cause a portion of your income to be subject to a higher tax rate.

Calculate capital gains and losses

To calculate the amount or loss you earned, you first need to know how much cryptocurrency you originally had. This is called your cost base.

Understand your cost base

When you buy cryptocurrency, your cost base is usually determined by the price you pay. However, if you obtain cryptocurrency through mining or pledge, your cost base is determined by the fair market value at the time you obtain it. The cost basis of the given cryptocurrency will depend on the cost basis of the person who transferred it to you and the fair market value at the time of your acquisition.

When you sell your cryptocurrency, you can subtract your cost basis from the sale price to determine whether you have incurred capital gains or capital losses. If your benefits exceed the cost base, you have capital gains. If not, you have a capital loss.

Short-term and long-term capital gains

Capital gains tax is levied at both the federal and state (where applicable) levels. They can be long-term or short-term, and the length of time you hold a cryptocurrency will affect the amount of taxes you ultimately need to pay. If you hold cryptocurrency for more than a year before selling it, you will usually pay a lower tax rate than you would if you sold it immediately.

Long-term gains are taxed at a lower capital gains rate. These tax rates (0%, 15%, or 20% at the federal level) vary based on your income. High-income taxpayers may also impose a 3.8% investment income tax on their earnings or other income.

Short-term gains will be taxed at your ordinary income rate, which is usually a higher, less favorable rate.

Remember that a taxable event occurs when you realize a loss or profit, which means that you have sold your cryptocurrency by selling it for cash, converting it to another cryptocurrency, or using it to purchase goods or services. If you still hold the original stake, the gain is unrealized.

Understand your capital losses

When you sell assets at less than the purchase price, you realize a capital loss. However, losing money can give you an advantage. You can use losses to offset other capital gains you may have during the year (including gains from non-crypto assets such as stocks), offset on a dollar-for-dollar basis, potentially reducing your overall tax bill.

If you lose more than your profit, or you make no profit at all, the maximum amount of loss you can report per year is $3000 to offset other income. The remaining portion will be carried forward to subsequent years until the full loss amount is applied.

Profit and Loss Report

Users can use cost-based specific policies in their tax center settings to generate gain/loss reports detailing capital gains or losses: users can choose one of HIFO (first-in, first-out), LIFO (last-in, first-out), and FIFO (first-in, first-out). The report will only contain activity information on Coinbase. It will not contain cryptocurrency-related transaction information outside of Coinbase. Before you use it to submit a declaration, be sure to check and verify the accuracy of the information.