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In recent years, more and more Americans have been getting into the cryptocurrency game with BTC, ETH, or other coins, but the laws around how to handle taxes for crypto transactions are still a bit of a wild west. So, let me break down how cryptocurrencies are taxed in the good ol’ USA.
Are cryptocurrencies subject to taxation?
Just like any other property, cryptocurrencies are taxable in the US. If you make a profit by selling or trading your crypto, that gain is subject to capital gains tax. And if you sell or trade your crypto at a loss, you can deduct that loss from other capital gains to reduce your overall tax burden.
The amount of tax you owe depends on how much capital gain/loss you made on your investment and how long you held onto the asset. Since each taxable event can create a capital gain, it’s important to keep track of the date, cost basis, sale value, and fees associated with each transaction.
Which crypto events are taxable and which ones aren’t?
Taxable events include:
- Selling crypto for good old American dollars (USD)
- Trading crypto for other cryptocurrencies (e.g., swapping BTC for ETH)
- Using crypto to buy goods or services
- Receiving crypto as a result of mining or a fork
On the flip side, the following events are typically not taxable:
- Buying crypto with good old American dollars (except in cases where the purchase price is lower than the fair market value of the purchased coins)
- Donating crypto to tax-exempt organizations
- Gifting crypto to someone (although if the gift is big enough, it may trigger a gift tax)
- Transferring crypto from one wallet you own to another wallet you own
How do I file my taxes on crypto?
Currently, most exchanges only offer transaction records, which means you’ll need to use another software or program to complete your taxes accurately.
Software for cryptocurrency tax filing:
How to get the crypto tax report on Pionex?
Download the Pionex app: https://www.pionex.us/en-US/download
Sign up with my referral link to have 20% off on the trading fee: https://www.pionex.com/sign/ref/ePAKBAeJda
