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Crypto Taxes
Crypto Taxes

How to Report Your Dogecoin Taxes in 2021

Wondering how to report your Dogecoin transactions on your taxes? 

You’re not alone. Dogecoin went through multiple price swings in 2021. Some investors saw thousands of dollars in profits, while others sold their Dogecoin at a loss. Many of these investors now feel confused about how to report their gains and losses on their tax returns. 

If you find yourself in this boat, don’t stress. By the time you finish reading this article, you’ll know how to correctly report Dogecoin profits and losses. We’ll also discuss a special situation where selling Dogecoin can even reduce your tax bill. 

What is Dogecoin? 

Dogecoin is a cryptocurrency that was created in 2013 by software engineers Billy Marcus and Jackson Palmer. The cryptocurrency was modeled after ‘Doge’, a popular meme at the time. 

In the following years, the cryptocurrency took on a life of its own. In May 2021, Dogecoin’s market cap soared upwards of $20 billion, after it was publicized by celebrities like Elon Musk and Mark Cuban. 

How is Dogecoin taxed? 

Just like other cryptocurrencies, Dogecoin is considered property by the IRS. That means Dogecoin is subject to both capital gains tax and income tax. 

Capital gains tax: Selling your Dogecoin or using it to purchase goods and services is considered a disposal event. You will incur capital gains or capital losses depending on how the price of your Dogecoin has fluctuated since you originally received it. 

Income tax: If you earn Dogecoin through mining or through work, this is considered ordinary income. You will be required to pay income tax on your earnings. 

Three common Dogecoin taxable events 

Let’s run through a few common scenarios where you’ll need to report Dogecoin on your taxes. 

I sold my Dogecoin for a profit. 

Selling Dogecoin at a profit means that you’ll be required to pay capital gains based on how much the value of your Dogecoin has increased since you originally received it. 

Dogecoin taxes infographic

Remember, capital gains tax varies depending on how long you’ve held your Dogecoin. If you’ve held it for longer than 12 months, you’ll pay the long-term capital gains tax. If you held your Dogecoin for less than 12 months, you’ll need to pay the short-term capital gains tax, which is usually higher. 

Long term vs short term capital gains

I sold my Dogecoin at a loss 

When you sell Dogecoin at a loss, you’ll incur capital losses depending on how much the value of your Dogecoin has decreased since you originally received it. 

Reporting capital losses comes with a tax benefit. Capital losses can offset your capital gains and up to $3000 of your personal income for the year. Additional capital losses can be rolled forward to future tax years. 

Dogecoin losses taxes

For more information, check out our guide to crypto tax-loss harvesting

I traded my Dogecoin for goods and services/other cryptocurrencies 

Trading your Dogecoin for goods and services or other cryptocurrencies is considered a disposal event. You’ll incur capital gains or capital losses based on how much the price of your Dogecoin has fluctuated since you originally received it. 

Dogecoin taxable event

I earned Dogecoin through mining

The rewards you earn from mining Dogecoin will be considered income. However, the form you need to fill out varies depending on whether it was mined as a hobby or through a business. 

If you mine Dogecoin as a hobby, you’ll report it as “other income” on line 21 of Form 1040 Schedule 1. 

On the other hand, if you mine Dogecoin through a business, you will report the income on Schedule C

For more information, check out our complete guide to crypto mining and staking taxes

I transferred my Dogecoin to another wallet 

Transferring your Dogecoin from one wallet to another is not considered a taxable event. You will not be required to pay income or capital gains taxes for doing this. 

Manage your Dogecoin taxes with CryptoTrader.Tax

Looking for a simple way to report taxes on Dogecoin and other cryptocurrencies? 

CryptoTrader.Tax can help. More than 100,000 investors use the software to track all of their cryptocurrency gains and losses. With just a few clicks, you’ll be able to import transactions from exchanges like Coinbase, Kraken, and Gemini. 

Get started today with a free preview report. There’s no need to enter your credit card information until you’re 100% sure your transaction data is correct! 

Recently updated on
October 11, 2021
Category:
Crypto Taxes

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