When do I owe tax on cryptocurrency? Capital gains tax: Selling your crypto, trading your crypto for another cryptocurrency, using your crypto to buy goods and services. In the United States, cryptocurrency is subject to capital gains tax (when you dispose of cryptocurrency) and income tax (when you earn cryptocurrency). Your tax rate depends on how much you earned during the year. How much is cryptocurrency taxed? Here’s a few examples of transactions subject to capital gains tax and income tax. Income tax: Earning crypto from staking, mining, referrals from an exchange, or as compensation for labor.

By integrating directly with leading exchanges, wallets, blockchains, and DeFi protocols, the CoinLedger engine can auto-generate all of your necessary tax reports. Note, CoinLedger requires “read only” access to your exchange account. 1. Select each of the cryptocurrency exchanges, wallets, and platforms youʼve used throughout the years. 2. Import your historical transactions by connecting your accounts to the CoinLedger platform or uploading the CSV transaction history report from your exchange. You can test out how it works by creating an account for free.

You can take a conservative or aggressive approach depending on your risk appetite. Aggressive approach: Treat withdrawing. You should reach out to a crypto tax professional if you’re unsure how to report your liquidity pool transactions. Depositing liquidity as crypto-to-crypto trades subject to capital gains tax. Conservative approach: Treat withdrawing. However, how to report your taxes may vary depending on the specific mechanisms of your DeFi protocol. In general, it’s recommended that you take the conservative approach. Depositing liquidity as non-taxable. You’ll incur a capital gain or loss depending on how the price of your crypto has changed since you originally received it.

Crypto Trading Fund

Without this information, you cannot accurately calculate your realized income or capital gains from your trading activity, and you won’t be able to accurately report them on your tax return. Tracking the cost basis and USD prices for every cryptocurrency across all exchanges, wallets, and protocols at any given time quickly turns into a difficult, if not impossible, spreadsheet exercise. Gathering and maintaining this information is extremely challenging for many cryptocurrency investors as most havenʼt been keeping detailed records of their investing activity.

It’s possible that ‘profile picture’ and ‘art’ NFTs will be considered collectibles and taxed accordingly. It’s likely that they’ll be considered ‘flow-through entities’. How are DAOs taxed? So far, the IRS hasn’t provided any guidance on how Decentralized Autonomous Organizations (DAOs) are taxed. This means that while the DAO itself won’t pay taxes, individuals in the DAO recognize income based on their share of the organization’s profits. For more information, check out our Complete NFT Tax Guide.