Crypto Taxes USA: 2024 [IRS Rules]

Navigate US cryptocurrency taxes confidently. Everything you need to know about crypto tax rates, crypto tax forms, how to file and how to save. Written and verified by experts.

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Key Takeaways

  • Cryptocurrency is treated as property, subject to capital gains and income tax.
  • Losses from crypto transactions can be used to offset gains and reduce your overall tax liability.
  • Failure to report crypto taxes can result in fines and criminal charges.
  • Tax deadlines for cryptocurrency are the same as those for traditional assets.
Written by
Florian Wimmer
Last Updated:
March 8, 2024
Chapter 1

Crypto Tax Basics

The basics of cryptocurrency taxation in the USA.

<div fs-richtext-component="info-box" class="info-box"><div class="flex-info-card"><img src="" loading="eager" width="64" height="64" alt="" class="icon-info-box"><div fs-richtext-component="info-box-text" class="info-box-content"><p class="color-neutral-800">Starting January 1, 2024, the Infrastructure Investment and Jobs Act requires reporting 10,000$+ crypto transactions to the IRS. Yet, the Treasury and IRS deferred digital asset reporting until new regulations are set, promising future guidance and public input on these rules. Stay informed: IRS</p></div></div></div>

Do you have to pay taxes on cryptocurrencies?

Yes, cryptocurrencies like Bitcoin are considered property for tax purposes in the US. Therefore, you must pay taxes on cryptocurrencies when you sell, trade, or otherwise dispose of them and realize a gain. The specific tax rate depends on the duration of holding the cryptocurrency (short-term or long-term capital gains) and your income bracket.


How much is crypto taxed?

In the US, cryptocurrency taxes are based on capital gains rates ranging up to 37%, varying by your income and how long you’ve held the asset. 

Short-term capital gains (for assets held less than a year) are taxed at your income tax rate, ranging from 10% to 37%. Long-term capital gains (for assets held more than a year) are taxed at reduced rates of 0%, 15%, or 20%, depending on your taxable income.

There’s more info here: IRS Crypto Tax Rates

How is Crypto Like Bitcoin Taxed in the USA?

Crypto taxation occurs in the US when a taxable event happens, such as selling crypto for fiat, trading one crypto for another, or using crypto to buy goods or services. 

Profits from these transactions are subject to capital gains tax, while losses can be used to offset other capital gains. 

Additionally, receiving crypto as income, through mining or as payment, is taxed as ordinary income based on its fair market value at the time of receipt. 

Taxpayers must report these transactions on their tax returns, using Form 8949 and Schedule D for cryptocurrencies.

Can the IRS Track My Crypto?

Yes, the IRS has been increasing its efforts to track cryptocurrency transactions and ensure compliance with tax laws. 

While cryptocurrency transactions occur on public blockchains, which provide a degree of transparency, the IRS can also utilize various tools and techniques to identify taxpayers who engage in cryptocurrency transactions. 

These may include subpoenas to cryptocurrency exchanges, data analysis, blockchain analysis software, and information sharing agreements with other government agencies. 

Additionally, the IRS has been issuing guidance and warnings to taxpayers regarding the importance of reporting cryptocurrency transactions accurately on their tax returns. 

We’ve written more about this here: Can the IRS track cryptocurrency?

What are Crypto Capital Gains and Capital Losses?

Crypto capital gains occur when you sell or exchange cryptocurrency for more than its purchase price, resulting in a profit. 

Capital losses happen when you sell or exchange cryptocurrency for less than its purchase price, resulting in a loss.

These gains and losses must be reported on your tax return, impacting your taxable income and tax liability. 

Capital gains are subject to capital gains tax, while capital losses can offset other capital gains and up to 3,000$ of other types of income.

Short-Term Capital Gains vs. Long-Term Capital Gains

In US cryptocurrency taxation, short-term capital gains apply to crypto held for less than a year before selling or trading, and are taxed as ordinary income according to your tax bracket (10%-37%). 

Long-term capital gains apply to crypto held for more than a year, taxed at lower rates (0%, 15%, or 20%) depending on your income. 

The distinction affects how much tax you owe on profits from your cryptocurrency investments and as such it is crucial to stay on top of your investments.

‍<div fs-richtext-component="info-box" class="info-box protip"><div class="flex-info-card"><img src="" loading="eager" width="64" height="64" alt="" class="icon-info-box"><div fs-richtext-component="info-box-text" class="info-box-content"><p class="color-neutral-800">Blockpit's free crypto portfolio tracker takes care of record keeping for you. Automatically import transactions from exchanges and wallets and let the portfolio tracker handle the rest.</p></div></div></div>

Crypto Capital Gains Tax Rates

crypto capital gains tax rates for short-term and long-term gains
Crypto Tax Rates for Tax Year 2023

Short-Term Capital Gains Tax Rates

Short-term capital gains (assets held for less than one year) are taxed at the taxpayer’s ordinary income tax rate, which ranges from 10% to 37%.

Short-Term Capital Gains Tax Rates

Short-term capital gains tax rates for crypto in the US match your ordinary income tax rates, ranging from 10% to 37%. These rates apply to crypto assets held for less than one year before being sold or exchanged.

2023 Short-Term Federal Income Tax Rate Brackets

Tax Rate Single Head of Household Married filing jointly Married filing separately
10% 0$ to 11,000$ 0$ - 15,700$ 0$ - 22,000$ 0$ - 11,000$
12% 11,001$ - 44,725$ 15,701$ - 59,850$ 22,001$ - 89,450$ 11,001$ - 44,725$
22% 44,726$ - 95,375$ 59,851$ - 95,350$ 89,451$ - 190,750$ 44,726$ - 95,375$
24% 95,376$ - 182,100$ 95,351$ - 182,100$ 190,751$ - 364,200$ 95,376$ - 182,100$
32% 182,101$ - 231,250$ 182,101$ - 231,250$ 364,201$ - 462,500$ 182,101$ - 231,250$
35% 231,251$ - 578,125$ 231,251$ - 578,100$ 462,501$ - 693,750$ 231,251$ - 346,875$
37% ≥ 578,126$ ≥ 578,101$ ≥ 693,751$ ≥ 346,876$

Long-Term Capital Gains Tax Rates

Long-term capital gains (assets held for more than one year) are taxed at a lower rate, ranging from 0% to 20% based on your income.How Do Tax Brackets Work?

Tax brackets are ranges of income set by the government that determine the rate at which each segment of a taxpayer's income is taxed. The United States uses a progressive tax system, meaning the more income an individual earns, the higher the tax rate they pay on that additional income.

Here's a simplified explanation of how it works:

  1. Income Divisions: Taxable income is divided into segments based on specified ranges, each range being a tax bracket.
  2. Progressive Rates: Each bracket is taxed at a corresponding rate, starting low and increasing for higher brackets.
  3. Marginal Taxation: Only the income within a particular bracket is taxed at that bracket's rate. This means different portions of your income could be taxed at different rates.
  4. Tax Calculation: To determine the tax owed, the tax rate for each bracket that your income falls into is applied to the portion of your income within that bracket's range, and then all the taxes are added up.

The United States defined seven federal income tax brackets for the 2023 tax year:

2023 Long-term Federal Income Tax Rate Brackets

Tax Rate Single Head of Household Married filing jointly Married filing separately
15% 44,626$ - 492,300$ 59,751$ - 523,050$ 89,251$ - 553,850$ 44,626$ - 276,900$
20% ≥ 492,301$ ≥ 523,051$ ≥ 553,851$ ≥ 276,901$

How Do Crypto Tax Brackets Work?

The tax rates on cryptocurrency gains in the US are based on the taxpayer’s income tax bracket. The tax brackets are an assortment of income levels to which a specific tax rate is applied. Your tax rate will rise as your income level increases.

The purpose of income tax brackets is to create a progressive tax system where higher earners pay a greater proportion of their income in taxes.

The United States has seven federal income tax brackets for the tax year 2023:

Income Range Income Tax Rate
Under 11,000$ 10%
11,001$ to $44,725$ 12%
44,726$ to 95,375$ 22%
95,376$ to 182,100$ 24%
182,101$ to 231,250$ 32%
231,251$ to 578,125$ 35%
Over 578,125$ 37%

So let’s say you have an income of $75,000 in a year, your taxable income falls into three brackets.

The first 11,000$ is taxed at 10%, the next 33,725$ (44,725$ – 11,000$) is taxed at 12%, and the remaining 30,275$ (75,000$ – 44,725$) is taxed at 22%.

Your total tax bill would be calculated as follows:

11,000$ x 10% = 1,100.00$
33,725$ x 12% = 4,047.00$
30,275$ x 22% = 6,660.50$
Total tax bill = 11,807.50$

Learn more about this: Crypto Tax Rates USA

How to Calculate Crypto Capital Gains

To calculate your crypto capital gains, you need to determine your cryptocurrency’s cost basis and fair market value (FMV) at the time of the taxable event. The taxable event can be selling, trading, or exchanging cryptocurrency for goods or services.

To calculate your capital gains or losses, you can use the formula:

crypto capital gains formula
Crypto capital gains formula

It is important to keep accurate records of all cryptocurrency transactions, including the date, amount, FMV, and cost basis, to correctly calculate your capital gains or losses.

<div fs-richtext-component="info-box" class="info-box protip"><div class="flex-info-card"><img src="" loading="eager" width="64" height="64" alt="" class="icon-info-box"><div fs-richtext-component="info-box-text" class="info-box-content"><p class="color-neutral-800">Blockpit’s crypto portfolio tracker collects, tracks and organizes all the necessary records you need for your crypto tax report. Try it now for free!</p></div></div></div>


Table of content
Chapter 2

Taxation of Crypto Transactions

A breakdown of various crypto transactions and their taxation.

Capital Gains Tax Events

<div fs-richtext-component="tax-status-capital-gains-tax" class="tax-status-pills"><div>Capital Gains Tax</div></div>

Capital gains tax events are certain acts, such as the sale or exchange of an asset, that result in a taxable capital gain or loss.

capital gains tax crypto transactions
Capital gains tax events

Income Tax Events

<div fs-richtext-component="tax-status-income-tax" class="tax-status-pills"><div>Income Tax</div></div>

When cryptocurrency earnings are significant, the IRS categorizes some crypto transactions as subject to income tax.

crypto income tax events
Income tax events

Non-Taxable Events

<div fs-richtext-component="tax-status-tax-free" class="tax-status-pills tax-free"><div>Tax Free</div></div>

Non-taxable events in the context of cryptocurrency refer to situations where the disposition of crypto assets does not trigger any tax liability.

tax free crypto transactions
Tax free events

It is important to note that while these events may not trigger a tax liability, they may still need to be reported on your tax return for record-keeping purposes.

Selling Crypto for Fiat

<div fs-richtext-component="tax-status-capital-gains-tax" class="tax-status-pills"><div>Capital Gains Tax</div></div>

In the US, when you sell a cryptocurrency like Bitcoin for a fiat currency like dollar, it's a taxable event. You must calculate and report any capital gains or losses on your tax return. The gain or loss is the difference between the cryptocurrency's sale price and its original purchase cost (cost basis). If you realize a gain, it will be taxed at a rate corresponding to your income tax bracket. Conversely, losses can offset any capital gains you've realized and may also be deductible against other types of income, subject to certain limits.

Buying Goods and Services Using Cryptocurrencies

<div fs-richtext-component="tax-status-capital-gains-tax" class="tax-status-pills"><div>Capital Gains Tax</div></div>

Using cryptocurrencies to purchase goods and services triggers a tax event similar to converting crypto into fiat currency. Taxes are incurred if there's a difference between the crypto's cost basis (purchase price) and its market value at the time you use it to make a purchase. This difference results in a capital gain if the value has increased, or a capital loss if it has decreased. The capital gain or loss should be reported on your tax return and will be taxed accordingly.

Trading One Crypto for Another

<div fs-richtext-component="tax-status-capital-gains-tax" class="tax-status-pills"><div>Capital Gains Tax</div></div>

In the United States, trading one cryptocurrency for another is a taxable event, where you must report capital gains or losses. To calculate your tax liability, subtract the cryptocurrency's cost basis (the price at which you originally acquired it) from the fair market value at the time of the trade. If the result is positive, you have a capital gain; if it's negative, you have a capital loss. This gain or loss must be reported on your tax return and is subject to taxation in accordance with IRS rules.

Crypto Margin Trading, Futures and Other CFDs

<div fs-richtext-component="tax-status-capital-gains-tax" class="tax-status-pills"><div>Capital Gains Tax</div></div>

Crypto margin trading, futures, and other Contracts for Difference (CFDs) are also taxed under the capital gains and losses framework. Taxes are calculated based on the difference between the cost basis and its fair market value at the time of the trade. This approach means that profits from these activities are subject to capital gains tax, while losses can potentially offset other capital gains or, within limits, be deducted against other types of income.


<div fs-richtext-component="tax-status-capital-gains-tax" class="tax-status-pills"><div>Capital Gains Tax</div></div>

NFTs (Non-Fungible Tokens) are subject to taxation similar to cryptocurrencies in the United States, facing capital gains tax on the profits derived from their sale or trade. If you sell an NFT within a year of acquiring it, the profit is considered a short-term capital gain and is taxed at the same rates as your ordinary income. However, if you hold the NFT for more than a year before selling, the profit then qualifies as a long-term capital gain, which is taxed at lower rates. This distinction aims to encourage longer-term investments by offering tax advantages for holding assets longer.

Receiving Cryptocurrency as Salary

<div fs-richtext-component="tax-status-income-tax" class="tax-status-pills"><div>Income Tax</div></div>

If an employee receives compensation in cryptocurrency, the value of the cryptocurrency at the time it is received will be reported on their W-2 form as income. Any gains or losses realized after holding the cryptocurrency for more than a year are subject to capital gains tax rates when the cryptocurrency is eventually sold or exchanged. 

Receiving Cryptocurrency in Exchange For Goods and Services

<div fs-richtext-component="tax-status-income-tax" class="tax-status-pills"><div>Income Tax</div></div>

Receiving cryptocurrency in exchange for goods or services is taxed as ordinary income with the taxable amount based on the cryptocurrency's fair market value at the time of the transaction. 

Failure to report this income can result in penalties and interest charges from the IRS.

Staking Rewards

<div fs-richtext-component="tax-status-income-tax" class="tax-status-pills"><div>Income Tax</div></div>

Staking rewards are recognized as taxable income, with the fair market value at the time of receipt being incorporated into your annual taxable income. Factors such as the specific cryptocurrency involved and the duration of staking may affect the tax implications. Maintaining precise records of staking rewards, including the dates of receipt, is essential for accurately determining your tax obligations. 

Learn more about this: Staking Taxes

DeFi Transactions

<div fs-richtext-component="tax-status-income-tax" class="tax-status-pills"><div>Income Tax</div></div> <div fs-richtext-component="tax-status-capital-gains-tax" class="tax-status-pills"><div>Capital Gains Tax</div></div>

The latest IRS guidance indicates that DeFi transaction taxes hinge on earning or disposing of cryptocurrency. Earning occurs when you receive extra coins or tokens from transactions, applicable to many DeFi activities.

Despite the lack of clear IRS guidelines for DeFi, certain tax treatments are considered relevant and applicable.

DeFi taxation examples
DeFi Taxation

We’re going into more detail in our guide: DeFi Tax USA

Mining Rewards

<div fs-richtext-component="tax-status-income-tax" class="tax-status-pills"><div>Income Tax</div></div>

In the United States, mining rewards are considered taxable income and must be valued at their market price at the time they are received. Depending on the miner's specific circumstances, these rewards may be reported as either self-employment income or miscellaneous income. Miners have the potential to deduct related expenses, such as equipment and electricity costs, as business expenses, which can reduce taxable income. Given the complexities of tax regulations concerning cryptocurrency mining, it's highly recommended to seek advice from a tax professional. This ensures accurate and compliant reporting of both mining rewards and associated expenses.


<div fs-richtext-component="tax-status-income-tax" class="tax-status-pills"><div>Income Tax</div></div>

Airdrops are subject to taxation at their fair market value on the date of receipt, which must then be reported as part of your gross income for that tax year. The specific tax rate applicable to the airdropped asset will vary according to your tax bracket. 

Find more details here: Airdrop Taxation

taxation of airdrops and hardforks
Airdop & Hardfork Taxation

Hard Forks

<div fs-richtext-component="tax-status-income-tax" class="tax-status-pills"><div>Income Tax</div></div>

When a hard fork generates a new cryptocurrency given to original holders, the IRS generally considers this to be taxable income at the fair market value of the new cryptocurrency at the time of the fork. While specific IRS guidance on this matter may be limited, this approach aligns with the broader principle of taxing income from various sources. Additionally, any future transactions involving the sale or exchange of the newly acquired cryptocurrency could trigger capital gains taxes, depending on the difference between the sale price and the fair market value at the time of the fork.

Referral Bonuses

<div fs-richtext-component="tax-status-income-tax" class="tax-status-pills"><div>Income Tax</div></div>

Cryptocurrency referral bonuses are considered taxable income and should be reported on your tax return, valued at their fair market value on the receipt date. It's crucial to maintain detailed records, including the date you received the bonus, its fair market value at that time, and any associated expenses or fees. This documentation is essential for accurate tax reporting and compliance.

Other Crypto Rewards (Learn to Earn, Play to Earn, etc.)

<div fs-richtext-component="tax-status-income-tax" class="tax-status-pills"><div>Income Tax</div></div>

Increasingly, incentive systems reward users with cryptocurrencies for tasks, games, or learning These earnings are generally subject to income tax. The fair market value is typically derived from data provided by cryptocurrency exchanges or market data providers. 

Buying Crypto with Fiat Money (Cash)

<div fs-richtext-component="tax-status-tax-free" class="tax-status-pills tax-free"><div>Tax Free</div></div>

Buying cryptocurrency with fiat currency is not a taxable event. However, future transactions involving the cryptocurrency, such as selling it, trading it for another asset, or using it to make purchases, may incur tax liabilities based on the capital gains or income earned from those activities.

is buying crypto taxable?
Taxes on Buying Crypto

HODLing Crypto

<div fs-richtext-component="tax-status-tax-free" class="tax-status-pills tax-free"><div>Tax Free</div></div>

Simply holding cryptocurrency long-term does not trigger taxes; however, any sale or exchange can result in capital gains or losses, determined by the value at the time of the transaction. Additionally, any interest or rewards from staking received during the holding period are considered taxable income and must be declared on your tax return.

Crypto Donations

<div fs-richtext-component="tax-status-tax-free" class="tax-status-pills tax-free"><div>Tax Free</div></div>

Donating cryptocurrency to a recognized nonprofit doesn't trigger capital gains or losses, per the IRS, and isn't subject to capital gains tax. Such donations are tax-deductible, with the deduction based on the crypto's fair market value on the day of donation.

To check a charity’s 501(c)3 status in the US, use the IRS’s database of exempt organizations. If you want to claim your donation as a tax deduction on your federal taxes, the charity must have 501(c)3 status. When you file your cryptocurrency taxes, you must complete Form 8283 if your donation exceeds 500$. Also, the IRS is explicit that you must obtain a qualified appraisal to claim a deduction for cryptocurrency donations worth more than 5,000$.

Receiving Crypto as a Gift

<div fs-richtext-component="tax-status-tax-free" class="tax-status-pills tax-free"><div>Tax Free</div></div>

Receiving cryptocurrency as a gift does not incur taxes at the moment of receipt. The recipient assumes the original cost basis of the cryptocurrency from the giver for tax purposes. In cases where the giver's cost basis is not available, the cost basis for the recipient is determined by the fair market value of the cryptocurrency on the day it was received as a gift. This approach ensures that when the recipient eventually sells or exchanges the gifted cryptocurrency, the correct cost basis is applied to calculate any capital gains or losses.

Giving Crypto as a Gift

<div fs-richtext-component="tax-status-tax-free" class="tax-status-pills tax-free"><div>Tax Free</div></div>

Up to 17,000$ in cryptocurrency can be gifted tax-free per person. The annual gift tax exclusion is what it is called.

This can reduce your overall tax burden by taking advantage of lower income tax rates in your household. If your donation exceeds this amount, as long as it doesn’t exceed the lifetime gift tax exemption (12.92$ million in 2023), you won’t be required to pay gift tax. But you might have to submit Form 709.

Transferring Crypto Between Wallets

<div fs-richtext-component="tax-status-tax-free" class="tax-status-pills tax-free"><div>Tax Free</div></div>

In the United States, transferring cryptocurrency between two wallets you own does not constitute a taxable event, and therefore, no taxes are due on these transfers.

Using Crypto Assets as Collateral for a Loan

<div fs-richtext-component="tax-status-tax-free" class="tax-status-pills tax-free"><div>Tax Free</div></div>

Using cryptocurrency as collateral for a loan does not trigger a taxable event since it does not involve selling or disposing of the cryptocurrency. However, if a borrower defaults on the loan and the lender takes possession of the collateralized cryptocurrency, the lender may face a taxable event. This is determined by the fair market value of the cryptocurrency at the time it is seized.

Crypto Losses

<div fs-richtext-component="tax-status-tax-deductable" class="tax-status-pills"><div>Tax Deductable</div></div>

Crypto losses can be used to offset capital gains, allowing for a deduction of up to 3,000$ against ordinary income if your losses exceed your gains. Any remaining losses can be carried forward to future years. It's crucial to maintain accurate documentation and reporting for these transactions. However, it's important to note that cryptocurrency losses cannot be used to offset gains from other types of investments. This distinction is key in tax planning and reporting for cryptocurrency transactions.

The strategic use of crypto losses to optimize your tax burden is known as Tax Loss Harvesting.

Crypto Fees

<div fs-richtext-component="tax-status-tax-deductable" class="tax-status-pills"><div>Tax Deductable</div></div> / <div fs-richtext-component="tax-status-tax-free" class="tax-status-pills tax-free"><div>Tax Free</div></div>

Crypto fees can be categorized into two types:

  • Transfer fees: These are fees paid to the network for processing a cryptocurrency for sending or receiving crypto. Transfer fees are not tax-deductible and cannot be used to reduce your taxable income.
  • Trading fees: These are fees paid to a cryptocurrency exchange or broker for executing a trade. Trading fees are considered deductible expenses and can be used to offset capital gains made from selling cryptocurrency.

Lost or Stolen Cryptocurrencies

Following the Tax Cuts and Jobs Act, the IRS has revised the rules concerning the deduction of lost or stolen cryptocurrency for investors. Previously, taxpayers could claim deductions for the loss of cryptocurrency due to theft or disasters as a capital loss. However, under the new legislation, such deductions are no longer permissible. This change means that investors are unable to deduct losses from scams, misplaced private keys, or similar incidents that result in the loss of cryptocurrency from their taxable income.

For losses that occurred prior to 2017, deductions might still be possible if the taxpayer has maintained appropriate documentation. Despite these restrictions, investors have the option to sell crypto assets that have depreciated in value to realize a capital loss, which can then be used to offset any capital gains and potentially reduce tax liability.

In cases where tokens are not listed on exchanges, investors might consider exchanging them through non-custodial wallets or even sending them to a burn wallet as a measure of last resort to manage their portfolio.

Learn more about this: Offsetting Crypto Losses

Exchange Bankruptcies

<div fs-richtext-component="tax-status-tax-deductable" class="tax-status-pills"><div>Tax Deductable</div></div>

In the unfortunate event of a crypto exchange bankruptcy, investors may incur losses that are treated as capital losses for tax purposes. These losses can potentially be utilized to offset capital gains and thereby reduce taxable income. 

However, the specific tax implications will depend on the individual circumstances of each investor and should be discussed with a qualified tax professional.


Table of content
Chapter 3

Optimizing Your Crypto Tax Report

Simple ways to optimize your transactions and reduce your tax burden.

How to Calculate Your Crypto Cost Basis in the US?

To calculate capital gains or losses on crypto assets in the US, you must know the "cost basis" or original purchase price. Common methods for determining crypto cost basis include FIFO (First-in, First-out), HIFO (Highest-in, First-out), Specific Identification, and Average Cost. As of 2021, the IRS hasn't explicitly allowed the LIFO (Last-in, First-out) method for crypto cost basis calculations. The method chosen can significantly impact taxes, so consulting a tax professional is advised.

It is important to note that the specific method you choose can have significant tax implications, and it is best to consult with a qualified tax professional to determine which method is right for you.

Read on: Crypto Cost Basis Methods

Ways to Reduce Your Cryptocurrency Taxes

There are several ways to reduce your crypto taxes in the US. Here are some strategies you can consider:

Tax-Loss Harvesting

If you have capital losses from your crypto transactions, you can use them to offset your capital gains and reduce your tax liability. This is known as tax-loss harvesting. Be sure to follow the IRS guidelines for tax-loss harvesting to ensure you use the strategy correctly.

Holding Period/HODL

If you hold your crypto assets for over a year, you will be subject to long-term capital gains tax rates, generally lower than short-term rates. Consider holding your assets for at least a year before selling or exchanging them to take advantage of these lower rates.

Charitable Donations

Donating crypto assets to a qualified charity can result in a tax deduction for the fair market value of the assets at the time of the donation. This can reduce your tax liability and support a good cause simultaneously.

Maximizing Deductions

If you are mining crypto or using it for business purposes, you may be able to deduct certain expenses related to your activities. Be sure to keep careful records and consult with a qualified tax professional to ensure that you are maximizing your deductions.

Pick the Right Cost Basis Method

Selecting an appropriate cost basis method for crypto transactions can lower your tax liability in the US. The chosen method affects reported capital gains or losses. For long-held, appreciated assets, HIFO may lower taxes compared to FIFO. Frequent traders might benefit from the specific identification method, allowing asset selection for sale based on cost basis. However, the optimal method varies by individual circumstances and transaction history.

Invest in IRAs

Investing in IRAs, including traditional and Roth IRAs, offers tax benefits for cryptocurrency investments, but with certain limitations. Traditional IRA contributions may be tax-deductible, but withdrawals are taxed. Roth IRA contributions are after-tax, with tax-free withdrawals. Crypto gains in IRAs are taxed upon withdrawal, with potential penalties for early access. Not all IRAs permit crypto investments, so it's important to be aware of restrictions and regulations.

Capital Gains Tax (CGT) Allowance

The Capital Gains Tax (CGT) allowance does not apply to cryptocurrency transactions by means. In the US, any profits you make from the sale or exchange of cryptocurrency are generally subject to capital gains taxes, regardless of the amount.

However, if your total taxable income is less than or equal to 44,625$ in 2023 (for single or married filing separately) you will pay no tax. (89,250$ for married filing; 59,750$ for head of household)

Tips on Preparing For The Crypto Tax Period

Here are some tips on preparing for the crypto tax period in the US:

Gather your information

Learn IRS rules on crypto taxes to identify taxable transactions and required forms. Use strategies like tax-loss harvesting and holding crypto for long-term gains. If past tax filings missed crypto transactions, review them and consider amending with a tax professional's help.

Familiarize yourself with the forms

For US tax returns involving cryptocurrency, familiarize yourself with necessary forms:

  • Form 1040: The primary form for individual annual income tax returns, including income, deductions, and credits.
  • Schedule D: Reports capital gains and losses from asset sales or exchanges, such as cryptocurrencies.
  • Form 8949: Required for reporting multiple capital gains or losses on Schedule D, providing detailed transaction information.
  • Form 1099-K: Issued by cryptocurrency exchanges to users exceeding certain transaction volume and gross receipt thresholds, summarizing yearly payments.
  • Form 1099-B: Provided by brokers or intermediaries to report cryptocurrency sales and related details.

The specific forms needed vary based on the nature and volume of your cryptocurrency transactions and your particular tax situation.

Learn more about Form 8949 and Schedule D, as well as Form 1099.

Use crypto tax software to calculate your gains and losses

There are various advantages to using a crypto tax program to figure out your earnings and losses.

reasons to use crypto tax software
The Benefits of Crypto Tax Software Like Blockpit

Which Records Do You Need to Keep?

When it comes to filing crypto taxes in the US, it is important to keep detailed records of all of your crypto transactions.

tax records to keep for the IRS
Records To Keep for the IRS

You should also keep records of your holdings and any transfers or transactions between your accounts.

The IRS has a six-year window to examine tax returns, so it is essential to retain these records for at least that long to guarantee you have the data you need in the event of an audit.

Crypto Tax Deadlines in the US

crypto tax deadlines in the US 2023
Tax Deadlines 2023

In the US, the tax deadline for crypto transactions is the same as for traditional investments. Here are the critical deadlines to keep in mind:

  • April 15: This is the tax filing deadline for most individuals in the US. If you earn income from crypto, you need to report it on your tax return.
  • June 15: This is the tax filing deadline for US citizens and residents living outside of the country.
  • October 15: If you filed for a tax extension, this is the final deadline to submit your tax return.

It is important to note that these deadlines apply to income earned from crypto trading, mining, staking, and other crypto-related activities. Filing and paying your taxes on time is also important to avoid late fees and penalties.


Table of content
Chapter 4

Automating & Filing Your Tax Report

What you need to know about the IRS, filing your crypto tax report, and using Blockpit.

What Happens If You Don’t Report Your Crypto Gains?

Not reporting crypto gains can lead to severe penalties:

  • IRS Penalties: Failure to report can attract fines up to 75% of the unpaid tax, interest charges, and criminal prosecution.
  • IRS Warning Letters:
    Letter 6173
    : Targets taxpayers with unreported income, demanding compliance actions within 30 days to avoid penalties.
    Letters 6174 & 6174-A
    : Notify individuals of potential underreporting in crypto transactions, urging review and correction of tax filings.
  • Consequences: Neglect can result in civil fines and criminal charges, with penalties based on the failure's extent and unreported income amount. Active IRS and DOJ investigations into deliberate noncompliance could lead to imprisonment and significant fines.

Consulting a tax professional upon receiving any IRS warning is crucial for compliance and avoiding legal issues.

What Happens if You Forget to Report Your Crypto Taxes?

Failing to report crypto taxes in the US can lead to penalties and interest. The IRS may issue a notice for unreported income, with consequences including late payment and failure to file penalties—up to 25% of the tax owed. Significant unreported crypto gains can escalate these charges. Non-compliance may trigger an IRS audit. To avoid penalties, accurately report crypto taxes and seek advice from a tax professional for any uncertainties.

Can the IRS Track Cryptocurrency?

The IRS monitors cryptocurrency transactions through various means. Despite crypto's decentralized nature, the IRS enforces tax compliance, receiving 1099 forms from exchanges like Coinbase. It partners with firms like Chainalysis to track transactions and issues subpoenas to exchanges for customer transaction data. With increased scrutiny and a cryptocurrency question on the 1040 tax form, it's harder for taxpayers to omit their crypto transactions.

Which Crypto Exchanges Report to the IRS?

In the United States, all cryptocurrency exchanges are required to report certain transaction information to the IRS under the Bank Secrecy Act (BSA). This information includes customer names, addresses, social security numbers or tax identification numbers, and transaction details such as amounts and dates.

Some of the larger cryptocurrency exchanges that have publicly stated that they will provide information to the IRS include Coinbase, Gemini, Kraken, and Bitstamp.

How to Report Crypto Taxes With the IRS?

To report your crypto taxes with the IRS, you must include your capital gains or losses on your tax return. Here is a general overview of how to report your crypto taxes:

  1. Complete Form 8949: Use Form 8949 to report your capital gains or losses from your crypto transactions.
  2. Transfer information to Schedule D: Transfer the information from Form 8949 to Schedule D.
  3. Complete Form 1040: Use Form 1040 to report your overall income, including capital gains or losses from crypto transactions.
  4. File your tax return: File your tax return by the tax deadline (usually April 15th, unless it falls on a weekend or holiday), or request an extension if needed.

It is essential to keep accurate records of your crypto transactions, including the purchase price, date of purchase, sale price, and date of sale.

Blockpit: Use Crypto Tax Software to Generate Fool-Proof Crypto Tax Reports

Blockpit, a crypto tax software, simplifies generating tax reports by importing transaction data from exchanges and wallets, automatically calculating capital gains or losses. It offers real-time tax calculation and shows unrealized gains or losses. Using Blockpit can streamline crypto tax reporting, minimizing errors and audit risks.

Using Blockpit couldn’t be easier:

1. Import your transactions

Blockpit offers direct integrations for crypto exchanges, wallets and DeFi protocols. Automatically import your transactions via API integration, wallet address synchronization, or by manually uploading an Excel file.

Discover all crypto integrations

2. Validate & Optimize

Blockpit offers smart insights and suggestions to optimize your tax report, fix issues, add missing values and to validate your transactions.

3. Generate your tax report

Generate your compliant tax report with the click of a button. Our tax engine calculates your tax report on the basis of the US tax framework.

Blockpit US Tax Report Overview
Blockpit US Tax Report Overview
Blockpit US Tax Report Form 1040
Blockpit US Tax Report Form 1040
Blockpit US Tax Report Capital Gains and Losses Summary
Blockpit US Tax Report Capital Gains and Losses Summary


File Your Crypto Taxes With TaxAct

TaxAct is a tax preparation software that offers a dedicated crypto tax importer to help individuals and businesses file their crypto taxes. The platform provides a simple process to import your cryptocurrency transaction data from various exchanges and wallets, calculate your gains and losses, and generate accurate tax forms.

File Your Crypto Taxes With TurboTax

TurboTax, known for its user-friendly tax software, provides a crypto tax solution that may not add much value if you've already used Blockpit for your crypto tax calculations. Nevertheless, it's beneficial for those preferring to file taxes independently, offering a step-by-step guide, integration with various tax forms, audit protection, and access to expert support. TurboTax is suitable for users with mixed income sources or those seeking additional reassurance and assistance in tax filing.

Can I Use Crypto Tax Software in Combination With TurboTax

Yes, you can use crypto tax software in combination with TurboTax. When you use a crypto tax software like Blockpit, it can help you track your transactions, calculate your gains and losses, and generate tax reports. Once you have generated these reports, you can import the data into TurboTax to make the tax filing process simpler and more efficient. To import your crypto tax data into TurboTax, you can typically use the “TurboTax Online” or “TurboTax Desktop” version.

File Your Crypto Taxes With Paper Forms

In the US, while you can file crypto taxes via paper forms such as Form 8949, Schedule D, and Form 1040, it's not recommended due to the potential for errors and time consumption. The IRS encourages electronic filing for faster and more accurate submissions. These forms require manual calculation of gains and losses and are accessible on the IRS website or local offices.

Table of content


What is a cryptocurrency?

Cryptocurrency is a digital or virtual currency that uses cryptography for security. It is decentralized and operates independently of a central bank. Cryptocurrencies are based on blockchain technology, a distributed ledger that records and verifies transactions. Some popular cryptocurrencies include Bitcoin, Ethereum, Ripple, and Cardano.

What is a capital gain?

A capital gain refers to the profit realized when an asset, such as stocks, real estate, or cryptocurrency, is sold for a higher price than its purchase price. It is calculated as the difference between the selling price and the asset’s purchase price.

What is a capital loss?

A capital loss is a decrease in the value of an investment or asset compared to its purchase price. It occurs when the asset’s selling price is lower than the purchase price. Capital losses can be used to offset capital gains for tax purposes.

Is trading one cryptocurrency for another a taxable event?

Yes, trading one cryptocurrency for another is generally considered a taxable event in the US. This is because the IRS treats cryptocurrency as property, and exchanging one property for another is taxable.

Is crypto taxed like stocks?

Cryptocurrencies are treated as property for tax purposes rather than stocks or currency in the US. This means that capital gains and losses from the sale or exchange of cryptocurrencies are subject to taxation like other types of property.

How do I pay taxes on crypto?

In the US, you pay taxes on your crypto by reporting your capital gains or losses on your tax return. You will report your capital gains or losses on Form 8949 and Schedule D of your tax return.

How are NFTs taxed?

NFTs (non-fungible tokens) are a relatively new asset class, and the tax treatment of NFTs is still evolving. Generally, NFTs are treated as property for tax purposes, meaning that buying, selling, or trading NFTs can result in capital gains or losses. If you sell an NFT for more than you paid, you will owe capital gains tax on the profit. If you held the NFT for more than a year, the long-term capital gains tax rate applies, which is lower than the short-term capital gains tax rate.

Sources & References

IRS, "Frequently Asked Questions on Virtual Currency Transactions", Accessed on 10/19/2023

IRS, "Topic No. 409, Capital Gains and Losses",, Accessed on 10/19/2023

The White House, "Fact Sheet: The Bipartisan Infrastructure Deal",, Accessed on 10/19/2023

Update Log

02/14/2024: Update 2024 / Updated tax forms / Updated structure

10/19/2023: Updated tax forms

10/13/2023: Updated tax guide structure

Disclaimer: The information provided in this article is for general information purposes only. The information was completed to the best of our knowledge and does not claim either correctness or accuracy. For detailed information on crypto regulations, we recommend contacting a certified legal advisor in the respective country.