Common Questions about Crypto Taxation

Many of our clients trade crypto and we do as well. Here is a list of questions that we are frequently asked by our clients.

Do I have to report crypto on my income tax returns?

The IRS considers crypto as “property” for income tax purposes. If you generate income or realize gains from the crypto, you are supposed to report the transactions on your income tax return and pay taxes. 

What kind of activities are taxable event for crypto currency?

The taxable events include but not limited to crypto mining, conversion, disposition, staking, etc.

If I receive crypto currency as compensation, how should I report it?

Yes, you need to use the Fair Market Value on the date you receive the crypto to calculate the amount of income. It is taxed as ordinary income and you need to report in on the tax return.

What are the tax rates for the crypto currency?

The tax rate depends on the characteristics of the income. If it is ordinary income, it is taxed at the same rate as your tax bracket. If it is capital gain, short-term gain is taxed at your ordinary income tax rate while long-term rate is determined by your taxable income.

If I create a NFT and sell in the marketplace, do I need to pay tax?

Yes, you are considered to participate in the trade or business. The income you receive is ordinary income and may be subject to self-employment tax.

I purchased NFT with crypto. Is it a taxable event?

If you purchase with crypto, there may be a taxable event when the value of NFT is different from your cost basis of the crypto.

Do staking rewards count as income?

Yes, receiving staking rewards is a taxable event. When you receive staking rewards, you need to assess the value in USD and recognize as ordinary income.

For more questions, please feel free to contact Dimov Tax at the form below.