US Crypto Tax Guide 2023

US Crypto Tax Guide 2023

How does us tax cryptocurrency?

When tax season rolls around, any American who experimented with cryptocurrencies will need to file a tax return with the IRS.
Non-fungible tokens (NFTs), one type of cryptocurrency, are nonetheless regarded as “property” for tax purposes in the US. Since the IRS made this decision in a notice issued in 2014, the majority of taxable transactions involving digital assets would be subject to capital gains tax treatment, much to how stocks are taxed. However, cryptocurrency income from specific activities is regarded as income and is consequently subject to income tax laws.

US Crypto Tax Guide 2023

When are Americans required to pay cryptocurrency taxes?

The following cryptocurrency-related capital gains tax situations:

  • purchasing cryptocurrencies using fiat (U.S. dollar, Japanese yen, etc.).
  • bitcoin gifts (anything over $15,000 for the tax year 2021).
  • Buying products and services using cryptocurrencies
  • the exchange of one digital asset for another. This covers buying NFTs with cryptocurrencies.
  • It’s important to note that you only pay tax on capital gains you receive as a result of these occurrences, not the total value of the sold assets. The amount used to determine this is the discrepancy between the asset’s purchase price and its sale price.

Additionally, the IRS has not yet clarified whether minting tokens, such as producing wrapped tokens, issuing NFTs to the general public, or issuing interest-bearing assets, results in a taxable event. At this point, it is also unclear whether adding to or taking away liquidity from DeFi liquidity pools using liquidity provider (LP) tokens is regarded as a crypto-crypto transaction. If you had experience with any of these things during the previous tax year, you should seek professional advice.

IRS Charge Tax in the below Situation:

  • using an airdrop to obtain cryptocurrency.
  • revenue from Defi loan in cryptocurrency.
  • Block rewards and transaction fees are how cryptocurrency miners make money.
  • Cash is earned through interest-bearing accounts and liquidity pools.
  • receiving cryptocurrency as payment for tasks, such as bug bounties, is possible.

How much cryptocurrency tax do you pay in the US?

The amount of bitcoin tax you owe in the U.S. is determined by your income tax rate, the length of time you owned the assets before selling them, and other factors.

Capital gains on short-term investments are taxed at the same rate as your income tax bracket for investments held for less than a year. A maximum of $3,000 can be deducted from any losses when calculating income tax. Losses in the future are transferable.

Long-term capital gains: For crypto assets kept for more than a year, the capital gains tax is significantly lower; it ranges from 0% to 15% to 20%, depending on the individual’s or the couple’s combined income.

Crypto Currency Tax Rate in USA For Long Term

TAX RATESINGLEMARRIED FILING JOINTLYHEAD OF HOUSEHOLD
0%$0-$44,625$0-$89,250$0-$59,750
15%$44,626-$492,300$89,251-$553,850$59,751-$523,050
20%>$492,300>$553,850>$523,050
Source – IRS

Crypto Currency Tax Rate in USA For Short Term

TAX RATESINGLEMARRIED FILING JOINTLYHEAD OF HOUSEHOLD
0%$0-$41,675$0-$83,350$0-$55,800
15%$41,676-$459,750$83,351-$517,200$55,801-$488,500
20%>$459,750>$517,200>$488,500
Source – IRS
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