4 Things to Know About Crypto Taxes
We pay taxes, and then we die—so they say.
Whether this is true or not depends on which side of the divide you find yourself in.
One thing for sure is that your BTC, ETH, NFTs, and DeFi tokens are taxable as long as you make money off their value fluctuation. Although digital assets may be loosely unregulated, stringent tax-reporting rules apply to everyone regardless of how confusing they can be.
You have to pay Caesar what belongs to him.
Failure to file and pay your fair share of crypto taxation can draw dire consequences. In the U.S., cryptocurrencies are classified as “property”. Therefore, crypto holders are required by law to pay taxes. Crypto gains are taxed like other assets in an investment portfolio.Learning about crypto tax is essential. The U.S. IRS considers digital assets like coins and NFTs property, and users must pay capital gains tax. Learn more here: Click To Tweet
To navigate the crypto tax landscape, know these:
- The Internal Revenue Service (IRS) tracks the day you added crypto to your portfolio, capital gains—if any, and the day you sold them. If a profit was made, it must be filed and taxed.
- Based on the above, the IRS won’t bother holders who bought their coins and are yet to liquidate. They will come knocking when you sell them for fiat or other digital assets. However, there is an exception in that the IRS will tax unsold staking rewards—they have been doing this for years now!
- Crypto to crypto and crypto to fiat transactions must be reported and capital gains subject to applicable capital gains tax in the U.S. The applicable tax is between zero and 20 percent, depending on your income.
- If you sold crypto for losses, they could deduct up to $3k on their crypto taxes, easing their tax burden.
Want to learn more about crypto taxation? Tune in to our recent podcast!
Dalmas is a very active cryptocurrency content creator and highly regarded technical analyst. He’s passionate about blockchain technology and the futuristic potential of cryptocurrencies.