Curated by: Rubric Advisors
Tax Planning
Crypto Taxes
This article explains how cryptocurrency transactions are taxed as property by the IRS, covering income treatment, record-keeping requirements, and specific considerations for NFTs and DeFi assets.
Crypto Taxes
1 / 5
Crypto Tax Fundamentals
- Cryptocurrency is treated as property by the IRS for tax purposes
- Every spend, trade, or exchange creates a taxable event requiring reporting
- Tax liability depends on market value, cost basis, and gain/loss calculation
- Capital gains rates apply based on holding period of the asset
Try Our Free Tools
Full Guide
Crypto Tax Fundamentals
- Cryptocurrency is treated as property by the IRS for tax purposes
- Every spend, trade, or exchange creates a taxable event requiring reporting
- Tax liability depends on market value, cost basis, and gain/loss calculation
- Capital gains rates apply based on holding period of the asset
Crypto Income Taxation
- Cryptocurrency received as wages is treated as ordinary income subject to taxes
- Mining crypto counts as ordinary income at fair market value when received
- Self-employment tax applies to consulting income received in cryptocurrency
- Business expenses for mining equipment and gas fees may be deductible
Record Keeping Requirements
- IRS prefers Specific ID method for identifying disposed crypto units
- Must track acquisition dates, basis, and fair market values for each unit
- Document sale dates, disposal values, and amounts received for each transaction
- Defaults to FIFO method if specific units are not properly identified
NFT Tax Treatment
- NFT sales trigger taxable events for both creators and collectors
- Purchasing NFTs with crypto creates taxable disposition of that cryptocurrency
- Potential 28% collectibles tax rate risk for NFTs held over one year
- Recurring revenue streams from royalties subject to ordinary income tax
Key Takeaways
- Keep detailed records of all crypto transactions including dates and values
- Consult tax professionals due to complex and evolving regulatory landscape
- Plan ahead for substantial tax burdens especially with NFT transactions
- Consider tax implications before making crypto trades or exchanges
Related Topics
Crypto Tax Planning Playbook
A comprehensive guide to strategies that may help minimize cryptocurrency tax obligations, from lot selection and harvesting to DeFi treatment and charitable giving.
Tax PlanningGifting Appreciated Stock: A Tax-Smart Way to Give
Gifting appreciated stock lets donors avoid capital gains tax while transferring wealth, a more tax-efficient approach than giving cash.
Tax PlanningOrdinary Income vs Capital Gains
Ordinary income and capital gains are taxed at different rates. Understanding the holding period rules, netting process, and loss carryforward can reduce your total tax burden.