Cryptocurrency has become a popular investment option for many people, but it’s important to remember that cryptocurrency transactions are taxed. Failing to report these transactions on your taxes can result in penalties and interest charges from the IRS. Here are seven taxable crypto transactions that you don’t want to miss.
- Purchasing Cryptocurrency
When you purchase cryptocurrency, you are incurring a taxable event. The IRS considers the purchase of cryptocurrency to be a taxable event because it is considered a property transaction. The tax implications of a purchase depend on whether you hold the cryptocurrency as a long-term investment or as a short-term investment.
- Trading Cryptocurrency
Trading cryptocurrency is also a taxable event. If you trade one cryptocurrency for another, you are incurring a taxable event. The tax implications of a trade depend on whether you hold the cryptocurrency as a long-term investment or as a short-term investment.
- Using Cryptocurrency to Purchase Goods or Services
If you use cryptocurrency to purchase goods or services, you are incurring a taxable event. The tax implications of using cryptocurrency to purchase goods or services depend on the value of the goods or services at the time of the transaction and the value of the cryptocurrency used in the transaction.
- Receiving Cryptocurrency as Payment for Goods or Services
If you receive cryptocurrency as payment for goods or services, you are incurring a taxable event. The tax implications of receiving cryptocurrency as payment depend on the value of the goods or services at the time of the transaction and the value of the cryptocurrency received.
- Mining Cryptocurrency
Mining cryptocurrency is a taxable event. The tax implications of mining cryptocurrency depend on the value of the cryptocurrency mined and the expenses incurred in the mining process.
- Airdrops and Forks
Airdrops and forks are also taxable events. An airdrop is a distribution of cryptocurrency to a large number of addresses, while a fork is a change in the underlying blockchain protocol that creates a new cryptocurrency. The tax implications of airdrops and forks depend on the value of the cryptocurrency received and the date of the transaction.
- Selling Cryptocurrency
Selling cryptocurrency is a taxable event. The tax implications of selling cryptocurrency depend on whether you hold the cryptocurrency as a long-term investment or as a short-term investment and the value of the cryptocurrency at the time of the sale.
It’s important to be aware of the tax implications of cryptocurrency transactions. By understanding these taxable events, you can ensure that you are properly reporting your crypto transactions on your taxes and avoiding any potential penalties and interest charges from the IRS. If you have any questions about cryptocurrency and taxes, it’s always best to consult with a tax professional.
