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Crypto Taxes
Crypto Taxes

Crypto Tax Rates: Complete Breakdown by Income Level 2021

Wondering how much you’ll need to pay in cryptocurrency taxes? Let’s break down how much money you’ll owe to the IRS in different scenarios. 

What is the cryptocurrency tax rate? 

Depending on your specific circumstances, cryptocurrency can be taxed as long-term capital gains, short-term capital gains, or income. Let’s break down all three. 

Income: If you’ve earned cryptocurrency through efforts such as mining or staking, this is considered ordinary income and will be taxed accordingly. This can range from 10% - 37% depending on your income level. 

Long-term capital gains: If you’ve held cryptocurrency for more than a year, you’ll be subject to the long-term capital gains rate. This ranges from 0%-20% depending on your income level. 

Short-term capital gains: If you’ve held your cryptocurrency for less than a year, you’ll be subject to the short-term capital gains rate. For tax purposes, this is treated the same as income and can range from 10% - 37% depending on your income level. 

Long-term capital gains tax rate

If you hold your cryptocurrency for longer than 365 days, you’ll be taxed at the long-term capital gains rate. Here’s a breakdown of tax rates by income level.  

Long term capital gains tax rates for cryptocurrency

Short-term capital gains/ income tax rate 

If you’ve held cryptocurrency for less than 365 days OR earned cryptocurrency income, you’ll need to pay ordinary income tax. Here’s a breakdown of tax rates by income level. 

US Income Tax Brackets

Not sure how much you’ll be paying in crypto taxes? Check out our free crypto tax calculator.  

Capital gains vs. income tax events 

Not sure whether your crypto transactions should count as a capital gain or income tax event? Let’s run through a few common scenarios. 

Capital gains events:

Trading your cryptocurrency for fiat. 

Crypto gains tax rate

Trading your cryptocurrency for other cryptocurrency. 

Crypto to crypto tax rate

Using cryptocurrency to buy goods and services. 

Paying for goods with crypto taxes

Income events 

Below includes a list of income events common for crypto users.

  • Receiving cryptocurrency as a referral bonus.
  • Receiving cryptocurrency in an airdrop. 
  • Earning cryptocurrency interest. 
  • Receiving a paycheck in cryptocurrency. 
  • Earning cryptocurrency from staking and/or mining.

How can I reduce my cryptocurrency taxes? 

While there’s no way to avoid cryptocurrency taxes, tax loss harvesting can help you reduce your tax liability. 

What is tax loss harvesting? 

Tax loss harvesting is the practice of selling your assets at a loss to offset your capital gains for the year. 

Capital losses can offset capital gains and up to $3000 of ordinary income. Net losses exceeding $3000 can be rolled forward into future years. 

It’s important to note that cryptocurrency has a unique advantage when it comes to tax loss harvesting. 

In the United States, stocks are subject to a wash sale rule which states that investors cannot claim losses if they buy back their shares within 30 days. However, this rule currently does not apply to cryptocurrency. 

Frequently asked questions 

Let’s take some time to answer a few commonly asked questions about cryptocurrency taxes. 

Do I have to pay tax on cryptocurrency? 

Yes. Cryptocurrency is an asset subject to taxation by the IRS. Evading taxes is punishable by a fine of up to $250,000 and possible jail time. 

How is cryptocurrency taxed in the United States? 

In the United States, cryptocurrency is considered a form of property. That means that it’s taxed similarly to stocks, real estate, and gold. 

How is cryptocurrency tax calculated? 

How much you pay in cryptocurrency taxes is dependent on several factors such as your income level, how long you’ve held your cryptocurrency, and your total amount of crypto gains/losses. 

How do I pay taxes on crypto? 

The easiest way to accurately report your crypto transactions across multiple exchanges and wallets is to use a tax platform like CryptoTrader.Tax. It’s simply too difficult to keep track of all your trades manually. 

Get started with cryptocurrency tax software 

If you're looking for an easy way to get your crypto tax reporting done for the year, you can use cryptocurrency tax software like CryptoTrader.Tax to automatically calculate your crypto taxes and generate your necessary tax forms. 

Get started with a free preview report. No credit card info required until you’re 100% sure your historical transaction data is accurate! 

Recently updated on
October 6, 2021
Category:
Crypto Taxes

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