The White House invested heavily into the Internal Revenue Service (IRS) in 2022shoveling about $45 billion into the department to amp up tax enforcement. Much of the focus is on cryptocurrency taxes. For crypto investors, this means its more important than ever to be on your game with crypto taxes.
Heres your resource on which crypto transactions are taxable, which ones arent, tax rates on crypto, how you can save money on fees, and how the U.S. taxes lost or stolen crypto.
To help you understand how cryptocurrency works, lets take a peek at a few key phrases related to crypto and taxes:
File your crypto taxes correctly in the US
Get your annual crypto tax statement while trading crypto on Public.com
For the purposes of federal income tax calculation, you need to treat your cryptocurrency gains as you would a piece of property.
If you have bought, sold, used, or traded crypto, you should do some careful calculations to determine whether you owe any taxes on that cryptocurrency.
U.S. individuals must report gains and losses on cryptocurrency holdings, not just material holdings. The IRS provides IRS Notice 2014-22 to explain how virtual currency taxes work. Essentially, since crypto is treated as property, capital gains taxes apply.
One crucial first step in simplifying your crypto taxes is to keep meticulous records of all cryptocurrency transactions. This will help you know the cost basis and gains on your digital assets when tax time arrives. The right brokerage account, including Public.com, will help you with these recordsbut its good to stay on top of it yourself so you know what to expect. Public will also share tax documents relating to your crypto transactions at the start of tax season.
A tax professional who knows cryptocurrency can provide specific tax guidance to help you avoid errors in your calculations of your estimated crypto tax liabilities.
When you sit down to figure out your crypto taxes, youll want to have a grasp on what the IRS considers a taxable event regarding cryptocurrency. Here are a few activities with your virtual currency that would likely be taxable events:
The general rule of thumb is that if you realize any gains from a crypto transaction, you could owe taxes on it (as is true with physical property).
If you simply have a crypto asset sitting in your investing account or cryptocurrency wallet, but dont sell or use it in any way for the entire year, you havent realized any gains. This is a non-taxable event.
Some other non-taxable events include donating cryptocurrency to charity and transferring cryptocurrency between your own crypto wallets.
Some crypto investors may need to navigate whats known as a hard fork. According to the IRS, a hard fork is when a cryptocurrency undergoes a major protocol change. If you dont receive a new cryptocurrency, this does not create taxable income. But if a hard fork is followed by an airdrop and you receive a new cryptocurrency, that does count as taxable income.
Below are the cryptocurrency tax brackets for 2022 and 2023, including long-term capital gains tax (held for one year or more) and short-term capital gains tax (held for less than one year).
A couple of notes:
File your crypto taxes correctly in the US
Get your annual crypto tax statement while trading crypto on Public.com
Long-term capital gains
| Income (single) | Income (married filing jointly) | Income (head of household) | Tax rate |
|---|---|---|---|
| $0-$41,675 | $0-$83,350 | $0-$55,800 | 0% |
| $41,676- $459,750 | $83,351-$517,200 | $55,801-$488,500 | 15% |
| $459,751 + | $517,201 + | $488,501 + | 20% |
Short-term capital gains
| Income (single) | Income (married filing jointly) | Income (head of household) | Tax rate |
|---|---|---|---|
| $0-$10,275 | $0-$20,550 | $0-$14,650 | 10% |
| $10,276- $41,775 | $20,551-$83,550 | $14,651-$55,900 | 12% |
| $41,776- $89,075 | $83,551-$178,150 | $55,901-$89,050 | 22% |
| $89,076- $170,050 | $178,151-$340,100 | $89,051-$170,050 | 24% |
| $170,051- $215,950 | $340,101-$431,900 | $170,051-$215,950 | 32% |
| $215,951- $539,900 | $431,901-$647,850 | $215,951-$539,900 | 35% |
| $539,901 + | $647,851 + | $539,901 + | 37% |
Long-term capital gains
| Income (single) | Income (married filing jointly) | Income (head of household) | Tax rate |
|---|---|---|---|
| $0-$44,625 | $0-$89,250 | $0-$59,750 | 0% |
| $44,626- $492,300 | $89,251-$553,850 | $59,751-$523,050 | 15% |
| $492,301 + | $553,851 + | $523,051 + | 20% |
Short-term capital gains
| Income (single) | Income (married filing jointly) | Income (head of household) | Tax rate |
|---|---|---|---|
| $0-$11,000 | $0-$22,000 | $0-$15,700 | 10% |
| $11,001- $44,725 | $22,001-$89,450 | $15,701-$59,850 | 12% |
| $44,726- $95,375 | $89,451-$190,750 | $59,851-$95,350 | 22% |
| $95,376- $182,100 | $190,751-$364,200 | $95,351-$182,100 | 24% |
| $182,101- $231,250 | $364,201-$462,500 | $182,101-$231,250 | 32% |
| $231,251- $578,125 | $462,501-$693,750 | $231,251-$578,100 | 35% |
| $578,126 + | $693,751 + | $578,101 + | 37% |
Public.com offers a Long Term Portfolio, which helps you lock your investments in for the long haul.
Due to the prevalence of crypto rug pull scams and crypto volatility, its important to know how to handle losses. As with other property, losses on your crypto can be used to offset gains, up to $3,000 per year. Plus, you can carry over additional losses to future years. Learn more about crypto tax-loss harvesting, or using capital losses to offset gains, from the IRS and a tax professional.
When you buy crypto, you might not be thinking about the possibility of a hacker stealing it. However, this does happen sometimesand while there are ways to protect your assets, you should know how it affects your taxes.
According to the IRS, there are two ways to lose crypto: Casualty loss (such as losing access to a crypto wallet) and theft loss (like a hacker stealing your assets).
Neither of these are tax-deductible in the eyes of the U.S. government. As a result, you should simply disregard any lost or stolen crypto from your tax calculations.
Once youve calculated any taxes you may owe on virtual currency, its time to file them along with your federal income tax return. Several crypto-focused tax software programs exist to help tax filers make sense of their cryptocurrency tax requirements. CoinTracker even integrates with TurboTax to simplify that process, and other crypto tax software may integrate with other regular tax software.
If you trade crypto on Public.com, you will receive an annual crypto tax statement from Public’s crypto trading partner Apex Crypto. When filing your taxes, you will use this crypto tax statement to complete IRS form 8949. Learn how to access your tax forms on the Public app or website here.
Once youve used Form 8949 to reconcile capital gains and losses for the year, simply report them on your IRS Form 1040 using Schedule D.
If youre paying more than you hoped on crypto taxes, consider reducing your transaction fees to account for the cost. Here are a few ways to save on crypto fees:
Want to make sure you’re reporting your crypto taxes correctly? Make sure you understand crypto wash sale rule and how it applies to your investments
The Public app offers Debit Card Funding, making it easy to immediately deposit funds within your account. At the same time, Instant Withdrawals helps investors instantly withdraw funds at their convenience.
Many of the same tax principles apply with cryptocurrency as other property types. However, there are lots of nuances unique to crypto as well. When it comes to tax reporting for crypto gains, the more you know, the better off youll be.
With Public, the social investing app that prioritizes community-oriented engagement and education, we know just how valuable it is to learn from others.
File your crypto taxes correctly in the US
Get your annual crypto tax statement while trading crypto on Public.com
No types of crypto are exempt from taxes on realized gains in the U.S
Crypto exchanges and trading platforms are required to report transactions to the IRS.
Yes, the IRS can track crypto activity as crypto exchanges and trading platforms are required to report them.
Yes, swapping one type of crypto for another is taxable in the U.S.
If you transfer crypto between wallets you own, the transaction is not taxable.
You do not have to pay gift tax on crypto you gift if you stay below the gift tax exemption of $16,000 for tax year 2022, or $17,000 for 2023. If you exceed that number, you can use your lifetime gift tax exemption ($12.06 million in 2022, $12.92 million in 2023) to avoid taxes.
Receiving crypto as a gift is not a taxable event, but you do need to pay capital gains when you sell.
For tax purposes, you should not attempt to avoid paying your legally required amount of taxes on crypto. However, there are ways to optimize your crypto transactions to limit fees and make the most of tax-loss harvesting.
