A Quick Guide To Crypto Currency Tax Guidelines
This guide provides general points; rules differ by country and can change. For personalized advice, consult a tax professional familiar with crypto in your jurisdiction.
Taxable events
Selling crypto for fiat (e.g., USD) — taxable capital gain or loss.
Trading one crypto for another — taxable (treated as a disposition).
Using crypto to buy goods or services — taxable (fair market value at time of purchase).
Receiving crypto as payment for services or business income — taxable as ordinary income at fair market value.
Mining, staking rewards, airdrops — generally taxable as ordinary income when received (fair market value), and may create a cost basis for future capital gains.
Non-taxable or deferred events
Buying crypto with fiat and simply holding — not taxable until a disposition.
Gifting crypto — may not trigger immediate tax for the giver; recipient may have carryover basis (rules vary, gifts above exclusion amounts can affect gift tax).
Transferring between your own wallets — not taxable if you maintain ownership and there's no change in beneficial ownership.
Basis, holding period, and gain/loss
Cost basis = amount you paid for the crypto plus fees. For earned crypto, basis = fair market value when received.
Holding period determines short-term (taxed as ordinary income) vs long-term capital gains (typically lower rates). Short-term = held one year or less; long-term = more than one year.
Gain/loss = proceeds from disposition minus adjusted basis. Include transaction fees in basis or proceeds as appropriate.
Recordkeeping
Keep records of dates, transaction types, amounts, fiat values at time of each transaction, fees, wallet addresses, and counterparty where applicable.
Export exchange reports and keep on file. Reconcile chain-level transactions if you use self-custody wallets or multiple exchanges.
Tax forms and reporting
Report capital gains and losses on the appropriate schedules (e.g., Schedule D and Form 8949 in the U.S.).
Report ordinary income from crypto on income forms (e.g., Schedule 1, Schedule C for business income, or W-2 if employer-reported).
Self-employment income from crypto may be subject to self-employment tax.
If you receive foreign crypto accounts or hold significant balances, consider reporting requirements (FBAR, FATCA) where applicable.
Special situations
Hard forks: typically taxed when you receive new tokens; basis = fair market value when received.
Staking rewards: treated as ordinary income on receipt; subsequent sale may produce capital gain/loss.
DeFi yield and liquidity mining: often taxable as ordinary income when rewards are received; complexity increases when rewards are convertible or reinvested.
Loss harvesting: you can realize capital losses to offset gains; excess losses may offset ordinary income within limits and carry forward remaining losses.
Insolvencies, exchange bankruptcies, or theft: losses may be deductible in certain circumstances; treatment varies by jurisdiction and situation.
Common pitfalls
Ignoring small transactions (each is reportable).
Misclassifying trades between wallets as non-taxable transfers.
Using cost basis incorrect methods across platforms (FIFO vs specific identification) — choose a method consistent with tax rules and document it.
Failing to account for fees, airdrops, staking, and rewards.
Practical tips
Use crypto tax software to aggregate transactions and calculate gains/losses.
Choose and document a cost-basis method (FIFO, LIFO, specific identification) if allowed in your jurisdiction.
Consider consulting a tax professional for complex situations (business income, large airdrops, staking, international issues).
Keep records for at least the statute of limitations period (typically 3–7 years depending on jurisdiction).
