Crypto Tax in the US
The outlook for cryptocurrencies in the United States is complex and evolving. Cryptocurrencies and the technologies that underpin them are gaining significant attention from both the government and the private sector.
What is the taxation process for cryptocurrency in the United States?
Cryptocurrency transactions in the US have specific tax implications that depend on the nature of the transaction. Here's an overview of various scenarios:
Receiving Crypto as Payment or Airdrop: If you receive cryptocurrency as payment for goods, services, or through an airdrop, the received amount is subject to taxation at ordinary income tax rates.
Disposing of Crypto (Selling or Trading): When you sell or trade cryptocurrency, the resulting net gain or loss is treated as a capital gain or loss. The tax rate for this capital gain varies based on how long you held the cryptocurrency.
Income from Staking, Lending, or Selling: Earnings from staking, lending, or selling cryptocurrency are taxable income. All cryptocurrencies are regarded as capital assets, leading to capital gains taxes on profitable sales.
What is the tax policy on crypto in the US?
If you owned the cryptocurrency for less than a year before selling it, you'll face higher capital gains tax rates (between 10% and 37%). Holding it for over a year qualifies you for lower rates (0% to 20%). These rates are tied to your total annual income.
What forms should be used to report crypto taxes?
Various forms are used to report cryptocurrency-related transactions:
Forms 1099 are for reporting cryptocurrency-related income.
Form 8949 is used for reporting capital gains transactions.
Forms 1099-B report transactions, while Form 1099-MISC covers cryptocurrency payment for services.
NFT transactions are reported using Form 1099-NEC.
All these forms must be submitted to the IRS, regardless of the tax amount owed.
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