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Ultimate 2024 Crypto Tax Guide [IRS Rules]

written by
Florian Wimmer
,
Blockpit CEO & Crypto Tax Expert
Reviewed by
Mag. Georg Brameshuber
,
Crypto Tax Expert & CPA
,
Last Updated:
July 12, 2024

Blockpit employs strict editorial principles to provide accurate, clear and actionable information. Learn more about our Editorial Policy.

Key Takeaways

  • Crypto is treated as property, subject to capital gains and income tax.
  • Short-term gains (held <1 year) are taxed at 10%-37%; long-term gains (held >1 year) at 0%, 15%, or 20%.
  • Crypto losses can offset gains and reduce tax liability.
  • Crypto tax deadlines match traditional assets: April 15 for most individuals.
Table of Contents

<div fs-richtext-component="info-box" class="info-box"><div class="flex-info-card"><img src="https://assets-global.website-files.com/65098a145ece52db42b9c274/650c6f4cef4c34160eab4440_Info.svg" 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>

How Much Is Crypto Taxed?

In the US, cryptocurrencies are taxed as property. You pay taxes on gains when you sell, trade, or dispose of them. Short-term capital gains (held less than a year) are taxed at income tax rates (10% to 37%), while long-term capital gains (held over a year) are taxed at reduced rates (0%, 15%, or 20%), based on your income.

There’s more info here: IRS Crypto Tax Rates

What are Crypto Capital Gains and Capital Losses?

Crypto capital gains occur when you sell or exchange cryptocurrency for more than its purchase price, while capital losses occur when you sell for less. These must be reported on your tax return. Gains are taxed, while losses can offset other gains and up to $3,000 of other income.

<div fs-richtext-component="info-box" class="info-box protip"><div class="flex-info-card"><img src="https://assets-global.website-files.com/65098a145ece52db42b9c274/650c6f4b151815fb0be48cec_Lightning.svg" loading="lazy" 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

Short-term and long-term capital gains tax rates fr cryptocurrency transactions

<div fs-richtext-component="info-box" class="info-box protip"><div class="flex-info-card"><img src="https://assets-global.website-files.com/65098a145ece52db42b9c274/650c6f4b151815fb0be48cec_Lightning.svg" loading="lazy" 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 Tip: Take advantage of lower long-term capital gains tax rates by holding crypto for over a year.</p></div></div></div>

Short-Term Capital Gains Tax Rates

Short-term capital gains (assets held for less than one year) are taxed at your ordinary income tax rate. See the details in the table below:

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

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.‍ See details in the table below:

<figure class="block-table">
<table>
<tr>
<th>Tax Rate</th>
<th>Single</th>
<th>Head of Household</th>
<th>Married filing jointly</th>
<th>Married filing separately</th>
</tr>
<tr>
<td>15%</td>
<td>44,626$ - 492,300$</td>
<td>59,751$ - 523,050$</td>
<td>89,251$ - 553,850$</td>
<td>44,626$ - 276,900$</td>
</tr>
<tr>
<td>20%</td>
<td>≥ 492,301$</td>
<td>≥ 523,051$</td>
<td>≥ 553,851$</td>
<td>≥ 276,901$</td>
</tr>
</table>
</figure>

How Do Crypto Tax Brackets Work?

Tax brackets are income ranges that determine tax rates. The US uses a progressive tax system, where higher income is taxed at higher rates. Here's how it works:

  1. Income Divisions: Taxable income is divided into segments, or brackets.
  2. Progressive Rates: Each bracket has a different tax rate, increasing with higher income.
  3. Marginal Taxation: Only income within a specific bracket is taxed at that bracket's rate.
  4. Tax Calculation: Apply the tax rate for each bracket to the income within that bracket, then sum up the taxes for the total owed.

Example: Tax Brackets

For 2023, the US has seven federal income tax brackets (see table above) If you earn 75,000$, your income falls into three brackets:

11,000$ at 10% = 1,100$
33,725$ at 12% = 4,047$
30,275$ at 22% = 6,660.50$
Total tax bill = 11,807.50$

Learn more about this: Crypto Tax Rates USA

How to Calculate Crypto Capital Gains and Cost Basis

To calculate crypto capital gains, find the cost basis and fair market value (FMV) at the time of the taxable event (e.g., selling or trading). Use the formula:

crypto capital gains formula
Crypto capital gains formula

Common methods for calculating cost basis include FIFO, HIFO, Specific Identification, and Average Cost. The IRS does not allow LIFO for crypto.

<div fs-richtext-component="info-box" class="info-box protip"><div class="flex-info-card"><img src="https://assets-global.website-files.com/65098a145ece52db42b9c274/650c6f4b151815fb0be48cec_Lightning.svg" loading="lazy" 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">Choosing a specific method can have significant tax implications. Consult a qualified tax professional to determine the best method for you.</p></div></div></div>

Keep accurate records of all transactions, including dates, amounts, FMV, and cost basis, to ensure correct calculations.

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!

Crypto Tax Deadlines 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: Tax filing deadline for most individuals. Report crypto income on your tax return.
  • June 15: Deadline for US citizens and residents living abroad.
  • October 15: Final deadline if you filed for an extension.

Optimizing Your Cryptocurrency Taxes

To reduce your crypto taxes in the US, consider these strategies:

  1. Tax-Loss Harvesting: Offset capital gains with capital losses to reduce tax liability. Follow IRS guidelines.
  2. Holding Period (HODL): Hold crypto assets for over a year to benefit from lower long-term capital gains tax rates.
  3. Capital Gains Tax (CGT) Allowance: Profits from crypto transactions are subject to capital gains taxes. If your total taxable income is less than 44,625$ (single or married filing separately) or 89,250$ (married filing jointly) or 59,750$ (head of household) in 2023, you may pay no tax on capital gains.
  4. Maximizing Deductions: Deduct expenses related to crypto mining or business activities. Keep detailed records and consult a tax professional.
  5. Pick the Right Cost Basis Method: Choose a cost basis method (FIFO, HIFO, Specific Identification) that minimizes tax liability. Consult a tax professional to determine the best method.
  6. Invest in IRAs: Use traditional or Roth IRAs (tax-advantaged retirement accounts) for crypto investments to gain tax benefits. Be aware of restrictions and regulations.
  7. Charitable Donations: Donate crypto to a qualified charity for a tax deduction based on the fair market value.

How to File Your Crypto Tax Return

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. Use it to report your overall income, including capital gains or losses from crypto transactions.
  • Schedule D: Reports capital gains and losses from asset sales or exchanges, such as cryptocurrencies. Transfer the information from Form 8949 to Schedule D.
  • Form 8949: Required for reporting multiple capital gains or losses on Schedule D, providing detailed transaction information. Use this form to report your capital gains or losses from your crypto transactions.
  • 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.

For detailed instructions on completing these forms, please refer to our articles:
Form 8949 and Schedule D

Form 1099

<div fs-richtext-component="info-box" class="info-box protip"><div class="flex-info-card"><img src="https://assets-global.website-files.com/65098a145ece52db42b9c274/650c6f4b151815fb0be48cec_Lightning.svg" loading="lazy" 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">The IRS can audit tax returns up to six years back. Blockpit's free crypto portfolio tracker helps you keep essential records (date, type, amount, cost basis, profit, fees, etc.) organized. Try it now for free!</p></div></div></div>

How to File Your Taxes With Blockpit

Tired of manually entering all your trades into Form 8949? We've got you covered! As Europe's leading crypto tax firm, Blockpit's crypto tax calculator offers acclaimed tax reports and pre-filled forms tailored for the United States. Our crypto tax software simplifies generating tax reports by importing transaction data from exchanges and wallets, automatically calculating capital gains or losses. It provides real-time tax calculations and shows unrealized gains or losses.

Want to see all the details? Check out the complete PDF of our crypto tax sample report.

Blockpit Crypto Tax Report Overview Page
Blockpit Crypto Tax Report Pre-Filled Schedule D
Blockpit Crypto Tax Report Capital Gains & Losses Summary

File Your Crypto Taxes With TaxAct

TaxAct is a tax preparation software with a dedicated crypto tax importer. It simplifies filing crypto taxes by importing transaction data from exchanges and wallets, calculating gains and losses, and generating accurate tax forms.

File Your Crypto Taxes With TurboTax

TurboTax offers a crypto tax solution with a step-by-step guide, integration with tax forms, audit protection, and expert support. It’s ideal for those who prefer to file taxes independently or have mixed income sources. However, if you’ve already used Blockpit for crypto tax calculations, TurboTax may add little value.

<div fs-richtext-component="info-box" class="info-box"><div class="flex-info-card"><img src="https://assets-global.website-files.com/65098a145ece52db42b9c274/650c6f4cef4c34160eab4440_Info.svg" loading="lazy" 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">Use Blockpit's crypto tax software to track transactions, calculate gains and losses, and generate tax reports. Import these reports into TurboTax (Online or Desktop) for a simpler and more efficient filing process.</p></div></div></div>

For detailed instructions on using TurboTax, refer to our articles:
TurboTax Desktop Filing Guide
TurboTax Online Filing Guide

Capital Gains Tax Events

Crypto Capital Gains Tax Events

Selling Crypto for Fiat

<div fs-richtext-component="tax-status-capital-gains-tax" class="tax-status-pills"><div>Capital Gains Tax</div></div>
Selling cryptocurrency for fiat currency like dollars triggers a taxable event. Report any gains or losses, calculated as the difference between the sale price and purchase cost (cost basis).

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 crypto to buy goods or services is taxable. Report gains or losses based on the difference between the purchase cost and the market value at the time of the transaction.

Trading One Crypto for Another

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

Trading one cryptocurrency for another is a taxable event. Calculate gains or losses as the difference between the original purchase cost and the fair market value at the time of the trade.

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>

These activities are taxed on the difference between the cost basis and the fair market value at the time of the trade. Report gains or losses accordingly.

NFTs

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

Selling NFTs is subject to capital gains tax. Short-term gains (held less than a year) are taxed as ordinary income, while long-term gains (held over a year) are taxed at lower rates.

Learn more about IRS NFT Tax Rules.

Income Tax Events

Crypto Income Tax Events

Receiving Cryptocurrency as Salary

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

The value of cryptocurrency received as salary is reported as income on the W-2 form. Any subsequent gains or losses are subject to capital gains tax.

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>

Crypto received for goods or services is taxed as ordinary income based on its fair market value at the transaction time.

Staking Rewards

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

Staking rewards are taxable income at their fair market value when received. Accurate record-keeping is essential.

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>

Income from DeFi activities, such as earning extra tokens, is taxable. Detailed guidance is available in our DeFi Tax USA guide.

DeFi taxation examples
DeFi Taxation

Mining Rewards

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

Mining rewards are taxable income at their market value when received, and may be reported as self-employment or miscellaneous income. Miners can deduct related expenses.

Learn more about Mining Taxation.

Airdrops

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

Airdropped cryptocurrencies are taxed at their fair market value on the receipt date and must be reported as income.

Find more details here: Airdrop Taxation

Hard Forks

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

New cryptocurrencies received from hard forks are considered taxable income at their market value when received. Future sales may incur capital gains tax.

Referral Bonuses

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

Referral bonuses in crypto are taxable income at their market value when received. Keep detailed records for accurate tax reporting.

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>

Crypto rewards from various activities are taxable income at their fair market value.

Non-Taxable Events

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

Non-Taxable Crypto Transactions

<div fs-richtext-component="info-box" class="info-box"><div class="flex-info-card"><img src="https://assets-global.website-files.com/65098a145ece52db42b9c274/650c6f4cef4c34160eab4440_Info.svg" loading="lazy" 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">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.</p></div></div></div>

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>

Purchasing cryptocurrency with cash is not taxable, but future transactions involving the crypto may be.

HODLing Crypto

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

Simply holding crypto does not trigger taxes; selling or exchanging it does.

Crypto Donations

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

Donating crypto to a recognized nonprofit is not taxable and is tax-deductible based on its market value.

<div fs-richtext-component="info-box" class="info-box protip"><div class="flex-info-card"><img src="https://assets-global.website-files.com/65098a145ece52db42b9c274/650c6f4b151815fb0be48cec_Lightning.svg" loading="lazy" 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">For tax deductions, the charity must have 501(c)(3) status. To verify a charity’s 501(c)(3) status, use the IRS database. Complete Form 8283 for donations over 500$. Obtain a qualified appraisal for crypto donations over 5,000$.</p></div></div></div>

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 crypto as a gift is not taxable. The recipient inherits the giver's cost basis.

Giving Crypto as a Gift

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

Under the annual gift tax exclusion, up to 17,000$ (2023) can be gifted tax-free per person annually.

Transferring Crypto Between Wallets

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

Moving crypto between your own wallets is not taxable.

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 crypto as loan collateral is not taxable unless the lender seizes the crypto.

Tax-Deductible Events

Crypto Losses

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

Losses can offset capital gains and up to 3,000$ against ordinary income. Excess losses can be carried forward.

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-free" class="tax-status-pills tax-free"><div>Tax Deductible</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

Under the Tax Cuts and Jobs Act, the IRS no longer allows deductions for lost or stolen cryptocurrency. Losses from scams or misplaced keys can't be deducted from taxable income. However, deductions for losses before 2017 might still be possible with proper documentation. Investors can sell depreciated crypto assets to realize a capital loss and offset gains. For unlisted tokens, consider using non-custodial wallets or burning them to manage the portfolio.

Learn more about this: Offsetting Crypto Losses

Exchange Bankruptcies

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

Losses from bankrupt exchanges can be treated as capital losses to offset gains.

Frequent Crypto Tax Questions

Is crypto taxed like stocks?

No, crypto is treated as property, not stocks or currency. Capital gains and losses are taxed like other property.

How do I pay taxes on crypto?

Report capital gains or losses on your tax return using Form 8949 and Schedule D.

How are NFTs taxed?

NFTs are treated as property. Buying, selling, or trading NFTs can result in capital gains or losses, taxed at short-term or long-term rates.

What happens if you forget to report your crypto taxes?

You may face penalties and interest. The IRS can issue notices, impose penalties up to 25%, and audit you. Report accurately to avoid issues.

Can the IRS track cryptocurrency?

Yes, the IRS monitors transactions through 1099 forms from exchanges, partnerships with firms like Chainalysis, and subpoenas. Increased scrutiny makes omission difficult.

Which crypto exchanges report to the IRS?

All US exchanges must report under the Bank Secrecy Act. Major exchanges like Coinbase, Gemini, Kraken, and Bitstamp provide information to the IRS.

What happens if you don’t report your crypto gains?

Not reporting can lead to severe penalties, including fines up to 75% of unpaid tax, interest charges, criminal prosecution, and potential imprisonment. Consult a tax professional if you receive an IRS warning.

Sources & References

IRS, "Frequently Asked Questions on Virtual Currency Transactions" https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions, Accessed on 10/19/2023

IRS, "Topic No. 409, Capital Gains and Losses", https://www.irs.gov/taxtopics/tc409, Accessed on 10/19/2023

The White House, "Fact Sheet: The Bipartisan Infrastructure Deal", https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/06/fact-sheet-the-bipartisan-infrastructure-deal/, Accessed on 10/19/2023

Update Log

06/2024: Restructre

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

10/2023: Updated tax forms

10/2023: Updated tax guide structure

Disclaimer: The information provided in this blog post 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.

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