Cryptocurrency has become popular for young professionals and investors. Many people buy only a few units to keep in hopes of future potential growth, but active investors are dedicated to buying and selling cryptocurrency to maximize their profit and revenue. When it comes to filing taxes, you do need to be aware that you may need to report it.
As long as you are holding cryptocurrency as an investment and no income is being earned, you generally won’t owe taxes on crypto until you sell. So if you don’t earn any income on your cryptocurrency and you don’t sell in the given tax year, then you can avoid paying taxes on your crypto.
However, the IRS generally defines cryptocurrency as property and investors have to pay levies on the difference between the purchase and sales price. Furthermore, if there is a profit on your crypto (held for less than one year) it is a short-term gain which is subject to regular marginal tax rates up to 37% based on your income.
Cryptocurrency should be reported on Form 8949 and if not, it is likely you will face an IRS audit. Regardless if you had gains or losses we recommend you file your cryptocurrency in order to help avoid an IRS audit. You will want to calculate any crypto gains and losses, complete the IRS form 8949 mentioned above, include your totals on Form Schedule D, include any crypto income, then complete the remainder of your tax return. For most people who buy and trade crypto online, accounting for it in your tax return is relatively easy.
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