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So you’ve decided to sell the crypto that’s been sitting in your wallet this year. Congrats! But what does that mean for your taxes?
Even though cryptocurrency was designed to be decentralized, you do still have to pay taxes on it. If your crypto gained value while you held onto it, you may owe taxes.
Calculating your crypto investing taxes can get pretty confusing — but we’ve built a free calculator to do the math for you. Just enter some basic info about yourself, and our crypto tax calculator will estimate how much you’ll owe in taxes.
How is cryptocurrency taxed?
In the eyes of the IRS, cryptocurrency is treated as property — so when you buy, sell, or exchange it, the IRS considers it a taxable event, and it’s subjected to the same tax rules as capital gains. If you make money when you sell your crypto, the IRS considers your crypto gains to be like capital gains incurred from stock transactions. Even trading one kind of cryptocurrency for another one can be considered a taxable event. You will also need to pay taxes if you earn money on other digital assets, such as NFTs.
You may also have to pay taxes on your crypto if you earn it by mining cryptocurrency or if you receive it in exchange for goods and services you’ve performed, like wages from work. In these cases, the crypto is taxed at your usual income tax rate, based on the fair market value of the crypto the day you received it.
However, simply buying crypto isn't considered a taxable event. You can buy and hold cryptocurrencies without incurring taxes, even if its value increases. To be taxed, you have to have a taxable event occur — like selling your crypto.
You owe crypto taxes if you spend your crypto and it increases in value from the time you bought it. There are several kinds of taxable events for crypto transactions, including:
- Selling cryptocurrency for a fiat currency (this refers to government-issued currency like the U.S. dollar)
- Using cryptocurrency to pay for goods or services
- Trading different types of cryptocurrency
Keep in mind that these are only considered taxable events if the value of your crypto has increased. To figure out if you owe crypto taxes, you need the cost basis, which is the amount you paid to acquire your crypto. Then, you compare that to the sales price when you sold or used the cryptocurrency. (Keep in mind that you may still have to reconcile this information on your tax return, but it should not result in tax due.)
How does capital gains tax work?
The capital gains tax is what you pay on any capital asset that increases in value while you own it — this could include stocks, investments and bonds, but could also refer to land or real estate, memorabilia, art, and cryptocurrency and NFTs. “Almost everything you own and use for personal investment purposes is considered a capital asset,” according to the IRS.
If you sell any capital asset for more than what you paid for it, you have a capital gain. If you sell the asset for less than you bought it, you have a capital loss. The IRS considers any profit you make from selling capital assets — those capital gains — to be income.
You’ll find the capital gains tax you owe by taking the total price you sold the asset for and deducting the original cost. Keep in mind that you only have to pay taxes when you sell the asset — not while you still own it.
How long you’ve owned a capital asset determines what kind of capital gains you have. There are two categories of capital gains: short-term and long-term.
- Short-term capital gains tax are the profits you make from selling a capital asset you’ve owned for less than a year. They’re paid at the same rate as the taxes you’d pay on your usual income — like wages from your job.
- Long-term capital gains tax are the profits you make from capital assets you’ve held for more than a year. Depending on your income, long-term capital gains tax rates are 0 percent, 15 percent, and 20 percent. These rates tend to be significantly lower than the ordinary income tax rate.
How much will you be taxed on crypto?
How much you’re taxed depends on a few factors:
- Your income tax bracket
- Your marital status
- The length of time you owned your crypto before selling it
If you owned your crypto for 365 days or less, you’ll pay short-term gains taxes, which are the same as your ordinary income tax rate. If you owned your crypto for longer, you’ll pay long-term gains taxes.
Here are the crypto tax rates on long-term gains for the 2023 and 2024 tax years:
And here are the crypto tax brackets on short-term gains for the 2023 and 2024 tax years:
NFT taxes work the same as crypto taxes. If you have a gain from selling an NFT, you owe taxes on those gains.
What should you enter into this crypto tax calculator?
Here are the fields you'll fill in:
- Investment: This refers to the amount of money you invested in your cryptocurrency
- Length of ownership: Indicates how long you’ve owned your crypto. This will affect whether you have short-term or long-term capital gains
- Buy price: Use this field to indicate the buy price per coin of your crypto, at the time you purchased it
- Sell price: Here, you’ll indicate the sell price per coin for your crypto, at the time you sold it
- State of residence: Different states have different tax rules. Pick the state you lived in when the sale occurred
- Annual income: Income is a factor in all capital gains taxes, so put your total annual income in this field
- Tax filing status: These will look familiar to you if you’ve filed taxes before. Your options are:
2. Married filing jointly
3. Head of household
If you're married and filing separately, select "single." If you got divorced during the year you're filing for, "single" is also the most common option.
Once you put in your information, our calculator will estimate your crypto taxes — and break it down by federal and state taxes.
How to report crypto transactions on your tax return
To best report your crypto transactions on your tax return, you should keep records of all of your crypto transactions from the year — from crypto, stablecoins, NFTs, and all your wallets.
If you sold cryptocurrency during the tax year, you’ll need to fill out Form 8949. The form is used to report the sales of capital assets — including your crypto. Form 8949 consists of two parts: Part I for Short-term and Part II for Long-term.
You’ll also want to report your capital losses. Sometimes these come with tax benefits.
Form 8949 will also ask if your crypto transaction was reported on a Form 1099-B, which reports income from “broker and barter exchanges” — stocks, bonds, other securities, and more.
Check the relevant box at the top of the sheet: A, B, or C.
- Short-term transactions reported on Form(s) 1099-B, showing it was reported to the IRS
- Short-term transactions reported on Form(s) 1099-B, showing it was not reported to the IRS
- Short-term transactions not reported to you on Form 1099-B
Most crypto exchanges don’t issue Form 1099-B to customers and the IRS, so you’ll most likely select option C.
After filling out Form 8949, take your total net gain or net loss and include it on Schedule D. This is an addendum to Form 1040, the individual tax return everyone fills out.
In addition, other forms you’ll use to report your ordinary income from crypto may vary:
- If you earned crypto from airdrops, forks, or other crypto wages, this is reported on Schedule 1 as other income. Many investors use this form to report ordinary income from cryptocurrency.
- If you earned crypto as a business — receiving payments for goods or services or running a crypto mining operation — this is most likely self-employment income, and should be reported on Schedule C.
And there you have it! Crypto taxes aren’t much more confusing than figuring out your capital gains taxes. Thankfully, the Keeper app now makes filing those taxes easy by doing all that work for you.
Over 1M freelancers trust Keeper with their taxes