How to Track and Report Crypto Transactions for Tax Purposes

Crypto-assets are taxable and must be tracked and reported to the IRS. This comprehensive tax guide has everything you need to know.

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As cryptocurrencies and blockchain assets continue to grow in popularity and widespread adoption, the United States Internal Revenue Service is increasingly interested in their taxation.

In the United States, cryptocurrency is subject to crypto tax and is classified as transactions rather than goods or assets. It goes without saying that failure to accurately track and report these transactions can result in penalties and fines.

Here is a comprehensive cryptocurrency tax guide for tracking and reporting crypto transactions for U.S. tax purposes.

How Cryptocurrency is Taxed in the United States

In the United States, if you invest in crypto-assets, such as non-fungible tokens (NFTs), and engage in other transactions for gain, you must be prepared for crypto taxation.

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Note that buying crypto on its own (or rising or falling in value while it's in your wallet) isn't taxable. Taxes are due when you sell, invest or otherwise dispose of the asset for gain.

Cryptocurrency is subject to taxation in two ways: capital gains tax and income tax.

Capital gains tax

This applies to profits from the sale of an asset that was purchased at a lower price. Any gain realized when selling or trading a digital asset for a higher price than purchased is subject to capital gains tax.

If the crypto assets have been held for less than a year, this is considered a short-term gain. If it has been held for more than a year, it is considered long-term gain.

Capital gains events include selling cryptocurrency for fiat currency and sending cryptocurrency (over $15,000) as gifts.

In addition, the purchase of goods and services with cryptocurrency is also considered a taxable capital gains event. Exchanging or exchanging one digital asset for another is also considered a capital gain event. This includes buying NFT with cryptocurrency.

As such, it is crucial...