Cryptocurrency Tax Calculator

Do I have to pay tax on cryptocurrencies?

While cryptocurrencies are meant to be decentralized and free from government control, Uncle Sam still relies on his fair share of taxation. This means that if the value of your coins increases, you may have to pay taxes whether you use them as investments or as cash.

Use the Cryptocurrency Tax Calculator below to determine the amount of tax you are allowed to pay on cryptocurrencies you sell, issue, or trade.

Calculator Disclaimer. Calculations are based on the February 2022 tax code and rates are subject to change. Visit the IRS website for the latest information on virtual currency earnings.

How is cryptocurrency taxed?

In general, the IRS taxes cryptocurrencies such as real estate and investments, not currencies. This means that all transactions, from the sale of coins to the use of cryptocurrency in the purchase, are subject to the same tax treatment as other capital gains and losses.

This gives crypto investors a valuable long-term opportunity: if they hold their coins for at least a year, they can benefit from reduced long-term capital gains tax from 0% to 20% depending on your income level. . Short-term crypto income from purchases under one year of age is subject to the tax rates you pay on all other income: from 10% to 37% in 2022, depending on your federal income tax rate.

These taxes apply even if you use cryptocurrency to buy; that is, you may be required to pay sales tax and tax on any profits you have made since you first bought or received your cryptocurrency.

You can also pay taxes on cryptocurrencies if you make money from mining cryptocurrencies or you receive them in exchange for products and services. In these cases, it will be taxed at your normal tax rate based on the amount of cryptocurrency on the day it was received. (If you later sell the earned or purchased cryptocurrency for a profit, you may have to pay taxes.)

How are cryptocurrencies declared in taxes?

You must report any profit (or loss) you receive from buying and selling cryptocurrencies to the IRS. Fortunately, many cryptocurrency exchanges provide transaction reports that include all purchases, sales, and transactions that have occurred in your account.

If all of your cryptocurrency tradings will take place on one exchange, it will be easy to get the information you need to include the cryptocurrency on your tax return. But things can be more complicated if you have crypto transactions on multiple exchanges, crypto wallets, or crypto credit cards. They must be notified for each location where a transaction takes place or track the transactions themselves.

To make this process easier, crypto-focused tax software like CoinTracker or TokenTax allows you to capture all crypto transactions on all the exchanges you use and generate a cost-based report to help you with your tax return.

Once you have collected all of your cryptocurrency transactions, you must report them to IRS Form 8949, Sale and Other Disposal of Capital Assets. This form is divided into two parts: short-term (for coins stored for more than one year) and long-term (for coins stored for more than one year).

Take the amount of short-term and long-term capital gains and put it in Table D, Equity and Losses.