Crypto Taxes and Cryptocurrency IRA Accounts

Crypto Taxes

Understanding the Tax Implications

Crypto taxes are a form of capital gains and income taxes that apply to transactions involving cryptocurrencies. The IRS categorizes cryptocurrencies as property for tax purposes, which means any transaction that leads to a profit can trigger a taxable event.

Common Taxable Events in Cryptocurrency:

• Selling cryptocurrencies for fiat (traditional) money — Taxes are due on the difference between the selling price and the purchase cost (the basis).

• Trading one cryptocurrency for another — Each trade is a taxable event, and gains must be calculated based on the market value of the coins at the time of the trade.

• Using cryptocurrency to purchase goods or services — Similar to trading, this is a taxable event where you must calculate gain or loss based on the value of the cryptocurrency when it was used to make the purchase.

• Earning cryptocurrency — Whether through mining, staking, or receiving it as payment for services, the earned cryptocurrency is taxed as income based on its market value at the time of receipt.

How to Report and Pay Crypto Taxes: