Answers to your crypto tax questions along with regulatory updates.https://cryptotaxcpa.com/https://cryptotaxcpa.com/2025-crypto-basis-rules-how-to-minimize-capital-gains/https://cryptotaxcpa.com/2025-crypto-basis-rules-how-to-minimize-capital-gains/The IRS has drastically changed how crypto cost basis is calculated for 2025 and forward. Since basis is now calculated on a wallet-by-wallet approach, taxpayers will need to be very cognizant of how and where they dispose of their crypto to avoid phantom capital gains. Wallet-By-Wallet Accounting Required In our previous article, we talked about […]Mon, 30 Dec 2024 16:20:44 GMThttps://cryptotaxcpa.com/crypto-cost-basis-2025/https://cryptotaxcpa.com/crypto-cost-basis-2025/The IRS is no longer allowing taxpayers to use the “universal” wallet approach starting in 2025. This is the method basically every crypto tax software has used historically and thus is a major departure from what most crypto investors have become accustomed to using. Moving forward, the IRS is requiring cost basis be calculated on […]Thu, 26 Dec 2024 19:43:53 GMThttps://cryptotaxcpa.com/irs-guidance-staking-income/https://cryptotaxcpa.com/irs-guidance-staking-income/The IRS has finally issued guidance on staking income. They state that cash-basis taxpayers must report the staking rewards when they have gained full dominion and control over the new assets. In the majority of cases, this will mean staking rewards are taxable upon receipt. This is consistent with articles we wrote previously along with […]Fri, 24 Nov 2023 16:16:01 GMThttps://cryptotaxcpa.com/irs-nft-taxation-collectible/https://cryptotaxcpa.com/irs-nft-taxation-collectible/The IRS has finally broken its silence on the taxation of nonfungible tokens (NFTs) – at least partially. Notice 2023-27 gives us some indication of how the IRS views NFTs and the analysis they are using to determine their taxation, but it does not give any definitive answers. The IRS is seeking public comment and […]Wed, 15 Nov 2023 18:54:27 GMThttps://cryptotaxcpa.com/crypto-value-decline-deduction/https://cryptotaxcpa.com/crypto-value-decline-deduction/The IRS has stated that a decline in the value of a cryptocurrency or NFT does not qualify as a loss under IRC section 165. Actually disposing of the asset will be required in order to take the deduction in the majority of cases, although there are some exceptions. It’s popular in certain crypto circles […]Fri, 03 Feb 2023 19:57:09 GMThttps://cryptotaxcpa.com/appraisals-crypto-charity-donations/https://cryptotaxcpa.com/appraisals-crypto-charity-donations/Qualified appraisals are required for any donation of cryptocurrency exceeding $5,000. The IRS also noted that if a taxpayer failed to obtain an appraisal, they would not qualify for the reasonable cause exception. This creates a significant barrier for crypto investors hoping to donate their assets. On January 10, 2023, the Office of Chief Counsel […]Thu, 26 Jan 2023 20:22:54 GMThttps://cryptotaxcpa.com/theft-losses-crypto-exchange-failures/https://cryptotaxcpa.com/theft-losses-crypto-exchange-failures/There is no clear consensus on whether or not crypto investors are able to take casualty or theft losses for funds held on defunct crypto exchanges. Many experts say it is not allowed under the 2018 Tax Cuts and Jobs Act (TCJA) revisions, while others point to special provisions outlined in 2009 for victims of […]Mon, 14 Nov 2022 22:05:52 GMThttps://cryptotaxcpa.com/staking-jarrett-lawsuit-dismissal/https://cryptotaxcpa.com/staking-jarrett-lawsuit-dismissal/Last year we wrote a series of articles talking about the Jarrett v. U.S lawsuit and its implications for the taxability of staking income. The first talked about the core arguments of the lawsuit itself and the second went into some of the interesting comments from the IRS’s pleadings in the case – especially their […]Mon, 07 Nov 2022 20:16:18 GMThttps://cryptotaxcpa.com/crypto-insolvent-bankrupt-exchanges/https://cryptotaxcpa.com/crypto-insolvent-bankrupt-exchanges/Crypto investors are likely to get tax write-offs from assets held on insolvent exchanges, but they are probably going to have to wait a while. Exchanges simply freezing withdrawals (or even declaring bankruptcy) is not enough. The assets must be deemed fully worthless and totally unrecoverable before you can take the deduction. Exchange Failures Abound […]Fri, 15 Jul 2022 13:50:57 GMThttps://cryptotaxcpa.com/bear-market-crypto-winter-opportunities/https://cryptotaxcpa.com/bear-market-crypto-winter-opportunities/Accelerating and increasing your income can be a good strategy during a bear market. You will pay the taxes sooner, but it may save you significantly in the long run. Pay Tax Now, Save Later This next strategy is counterintuitive: actively working to increase your income and generate taxable events sooner rather than later. That’s […]Thu, 14 Jul 2022 17:03:22 GMThttps://cryptotaxcpa.com/tax-loss-harvesting/https://cryptotaxcpa.com/tax-loss-harvesting/Most people aren’t making a ton of money in crypto right now. The market is down substantially and a lot of people – especially those who got involved in crypto more recently – are underwater. As we’ve mentioned in other articles, we have people coming to us who made millions of dollars last year who […]Wed, 13 Jul 2022 15:47:44 GMThttps://cryptotaxcpa.com/wrapping-crypto-taxable/https://cryptotaxcpa.com/wrapping-crypto-taxable/Wrapping Bitcoin and other tokens allows them to be used on different networks. Is the act of wrapping and unwrapping these tokens taxable? Some experts say yes and some say no. We’ll discuss both theories in more detail in this article. What Are Wrapped Tokens? We’ve already talked about wrapped tokens in a previous article, […]Mon, 11 Jul 2022 14:52:17 GMThttps://cryptotaxcpa.com/fifo-hifo-lifo-crypto-tax/https://cryptotaxcpa.com/fifo-hifo-lifo-crypto-tax/The best crypto accounting method will depend on the type of investor. It will also vary based on overall market conditions. FIFO can be helpful for long-term investors because it is more likely to qualify for the long-term capital gains rate, but it may also show higher capital gains. HIFO is often helpful for active […]Fri, 08 Jul 2022 14:37:31 GMThttps://cryptotaxcpa.com/liquidity-pools-taxed/https://cryptotaxcpa.com/liquidity-pools-taxed/The IRS has not issued any guidance on the taxation of liquidity pools. That said, there are a few prevailing theories on whether or not the entry into and exit out of the LP are taxable events, which we will discuss in this article. The earnings within the pool itself are taxable income. No IRS […]Thu, 07 Jul 2022 14:18:39 GMThttps://cryptotaxcpa.com/p2e-games-good-investments/https://cryptotaxcpa.com/p2e-games-good-investments/Is it a good idea to invest in play-to-earn (P2E) games? In a previous article, we talked about the need to cash out a percentage of your profits in real time. And we gave some examples of the catastrophic consequences that can arise if you fail to do that. Play-to-earn (P2E) games might be one […]Tue, 05 Jul 2022 18:36:18 GMThttps://cryptotaxcpa.com/stablecoins-not-risk-free/https://cryptotaxcpa.com/stablecoins-not-risk-free/Stablecoins are not currency. While they are an important part of blockchain’s development and can be a component of your crypto investing strategy, they are anything but “risk free”. Like any other crypto asset, do not invest anything in them that you cannot afford to lose. Given the importance of paying your tax obligations, putting […]Mon, 20 Jun 2022 15:23:02 GMThttps://cryptotaxcpa.com/cashing-out-crypto-profits-avoid-tax-catastrophes/https://cryptotaxcpa.com/cashing-out-crypto-profits-avoid-tax-catastrophes/Taking profits and setting aside a percentage of that income is one of the most important things you can do as part of your crypto tax planning. It’s simple (and often ignored), but it is one of the most important wealth preservation strategies available – especially during periods of market volatility. The Importance for Cash […]Thu, 16 Jun 2022 21:33:27 GMThttps://cryptotaxcpa.com/wrapped-crypto-tokens-save-taxes/https://cryptotaxcpa.com/wrapped-crypto-tokens-save-taxes/High interest DAOs are horribly tax inefficient. Wrapping the token helps correct this, although it is unclear if this method will hold up to IRS scrutiny in the future. High Yields, High Tax Bills Olympus DAO (OHM) and other high-yield DAOs were all the rage in 2021. These projects advertised absolutely insane APYs and people […]Fri, 10 Jun 2022 19:55:03 GMThttps://cryptotaxcpa.com/irs-says-not-all-crypto-is-property/https://cryptotaxcpa.com/irs-says-not-all-crypto-is-property/A while back we wrote about the Jarrett v. USA case and how it will affect the taxation of staking income. The Jarrett Case’s Importance for Staking On December 20, 2021 the IRS offered the Jarretts a full refund of their taxes paid. The cryptoverse exploded with people somehow thinking this meant that staking income […]Tue, 17 May 2022 17:26:07 GMThttps://cryptotaxcpa.com/crypto-credit-debit-card-rewards-taxable/https://cryptotaxcpa.com/crypto-credit-debit-card-rewards-taxable/In general, rewards received from crypto credit and debit cards are not taxable. They are considered a reduction in purchase price, not income. However, promotional amounts that are not tied to an actual purchase (such as some sign-up bonuses), are typically considered taxable income. When those crypto rewards are ultimately disposed of, this will also […]Mon, 02 May 2022 17:01:26 GMThttps://cryptotaxcpa.com/paying-crypto-debit-credit-card-taxable/https://cryptotaxcpa.com/paying-crypto-debit-credit-card-taxable/Crypto Tax CPA explains the benefits and risks of using crypto cards.Thu, 28 Apr 2022 18:48:48 GMThttps://cryptotaxcpa.com/how-is-node-operator-and-node-validator-income-taxed/https://cryptotaxcpa.com/how-is-node-operator-and-node-validator-income-taxed/Node operators will most often be taxed the same way as crypto miners. But there are situations where their rewards could be taxed as regular staking income. Node Income ≠ Staking Income In the past we’ve discussed how staking rewards are taxed – both currently and how they may be taxed in the future. But […]Thu, 06 Jan 2022 16:22:22 GMThttps://cryptotaxcpa.com/jarrett-v-us-lawsuit-future-crypto-staking-income-taxability/https://cryptotaxcpa.com/jarrett-v-us-lawsuit-future-crypto-staking-income-taxability/A few months ago, we discussed how staking rewards are currently taxed. In that article, we noted that under current IRS guidance we can discern that: Staking rewards are taxable income The rewards are taxable income upon receipt But we also noted two specific reasons why this was likely to change in the future. Precedent-Setting Staking […]Thu, 30 Dec 2021 21:01:14 GMThttps://cryptotaxcpa.com/write-off-worthless-nfts-cryptocurrency-tokens/https://cryptotaxcpa.com/write-off-worthless-nfts-cryptocurrency-tokens/You are able to write off worthless crypto and NFTs if you can show you have permanently discarded them. The simplest way to do this is usually to send them to a null address. The Volatility of Crypto Assets If you’re only buying assets associated with major crypto projects, you’ll probably never run into this […]Mon, 27 Dec 2021 20:57:24 GMThttps://cryptotaxcpa.com/how-will-metaverse-nfts-be-taxed/https://cryptotaxcpa.com/how-will-metaverse-nfts-be-taxed/Before reading this article, we suggest first reading our previous articles on NFTs and P2E gaming. While they’re of course different topics, several of the concepts in those articles are foundational to what we are discussing here with respect to metaverse NFTs. How Are NFTs Taxed? How Are Art NFTs Taxed? How Are Gaming NFTs […]Thu, 02 Dec 2021 22:56:42 GMThttps://cryptotaxcpa.com/crypto-p2e-play-to-earn-gaming-rewards-taxable/https://cryptotaxcpa.com/crypto-p2e-play-to-earn-gaming-rewards-taxable/Rewards from blockchain games are likely taxable – either as hobby income or as business income. Making Money Just by Gaming We’re going to take a break from talking about NFT taxes to discuss P2E (play-to-earn) gaming, since some of the ideas we discuss here will help set a foundation for our discussion on taxation […]Tue, 30 Nov 2021 17:20:32 GMThttps://cryptotaxcpa.com/how-are-gaming-nfts-taxed/https://cryptotaxcpa.com/how-are-gaming-nfts-taxed/Gaming NFTs vs. Art NFTs In our last article we discussed how digital art NFTs are taxed. Some of those principles will be true for gaming NFTs as well: If you are the original creator of the NFT and sell it, this will be considered business income If you buy an NFT simply to hold […]Fri, 26 Nov 2021 08:00:00 GMThttps://cryptotaxcpa.com/how-are-art-nfts-taxed/https://cryptotaxcpa.com/how-are-art-nfts-taxed/In our last article on NFTs we noted how the different use cases for various NFTs may affect how they are taxed. NFTs that have a hard utility (such as usable items in gaming) are possibly going to receive different tax treatment than those that do not. What Are Digital Art NFTs? Again, we stress […]Thu, 25 Nov 2021 01:00:00 GMThttps://cryptotaxcpa.com/how-are-nfts-taxed/https://cryptotaxcpa.com/how-are-nfts-taxed/At this point there has not been any NFT-specific guidance issued by the IRS. Their taxation will vary based on future guidance and likely the use case for each specific NFT. No NFT Guidance or Case Law We’ve only written roughly a dozen crypto blogs at this point and – astoundingly – we have already […]Wed, 24 Nov 2021 14:21:47 GMThttps://cryptotaxcpa.com/do-i-qualify-for-crypto-trader-tax-status/https://cryptotaxcpa.com/do-i-qualify-for-crypto-trader-tax-status/It is very unlikely that crypto investors will qualify for “Trader Tax Status” (TTS) on their tax returns, although it is not impossible. Day Trading and Professional Traders Some investors – in and outside of blockchain – will want to qualify for TTS on their day trading activities. This treats your trading activities as a […]Tue, 23 Nov 2021 18:18:12 GMThttps://cryptotaxcpa.com/best-crypto-exchanges/https://cryptotaxcpa.com/best-crypto-exchanges/Update: since we originally posted this article, the crypto market has shifted considerably. Celsius and Voyager have both stopped allowing withdrawals and other exchanges are likely to follow suit. The benefit of earning interest has become completely outstripped by this risk of insolvency. Move all of your assets to cold wallets or risk losing them […]Mon, 22 Nov 2021 11:30:42 GMThttps://cryptotaxcpa.com/are-hard-forks-taxable-income/https://cryptotaxcpa.com/are-hard-forks-taxable-income/Tokens received from hard forks are taxable income if a new token is received as a result of the hard fork. Hard Fork Taxation We largely covered this topic in our article on the taxability of airdrops. But for anyone searching specifically for hard forks, we wanted to make sure this information was easily accessible. […]Mon, 15 Nov 2021 12:00:16 GMThttps://cryptotaxcpa.com/does-crypto-qualify-for-1031-exchanges/https://cryptotaxcpa.com/does-crypto-qualify-for-1031-exchanges/No, cryptocurrencies are not considered “like-kind” property and do not qualify for Section 1031 exchanges. Intangible Assets Ineligible for 1031s Post-TJCA If you’ve read our guide on how cryptocurrency trades are taxed, you likely already knew the answer to this. Trading one token for another token is always a taxable event, which would of course […]Fri, 12 Nov 2021 17:07:58 GMThttps://cryptotaxcpa.com/can-irs-track-crypto-activity/https://cryptotaxcpa.com/can-irs-track-crypto-activity/As you’ve likely seen if you’ve read our other articles, dealing with cryptocurrency taxes can be a nightmare. Almost every transaction is reportable in some form or fashion, your cost basis is affected whenever you have a taxable transaction, and the rules are changing so quickly that the understanding you have now will likely be […]Thu, 11 Nov 2021 17:15:38 GMThttps://cryptotaxcpa.com/crypto-require-fbar-form-8938/https://cryptotaxcpa.com/crypto-require-fbar-form-8938/Currently, holding cryptocurrency does not require you file an FBAR filing on a FinCEN 114. Similarly, it also does not require a Form 8938. But like most things crypto, this is likely to change. For both forms, the IRS has signaled that they are going to propose that the rules be amended to include cryptocurrencies. […]Wed, 10 Nov 2021 17:44:14 GMThttps://cryptotaxcpa.com/how-to-track-crypto-activity/https://cryptotaxcpa.com/how-to-track-crypto-activity/The majority of cryptocurrency activity will result in some sort of reportable transaction. This can cause difficulties both if you’re trading on a larger centralized exchange and if you’re using a smaller decentralized one. On the larger platforms, your activity is much more likely to be reported directly to the IRS from the exchange. So […]Mon, 08 Nov 2021 17:01:56 GMThttps://cryptotaxcpa.com/is-crypto-subject-to-the-wash-sale-rule/https://cryptotaxcpa.com/is-crypto-subject-to-the-wash-sale-rule/Selling vs. “Selling” For traditional investments there is something called the “Wash Sale Rule”. It states that if you sell a stock at a loss but then buy an identical (or “substantially similar”) stock within 30 days, you are not able to deduct the loss. Essentially, the IRS does not want people “selling” their investments […]Fri, 05 Nov 2021 16:14:54 GMThttps://cryptotaxcpa.com/are-airdrops-taxable/https://cryptotaxcpa.com/are-airdrops-taxable/Yes, airdrops are taxable income. Actual IRS Guidance on Airdrops Somewhat surprisingly, the IRS has issued specific guidance with respect to airdrops. As we’ve noted previously, guidance is lacking on the majority of crypto topics. Staking, as ubiquitous as it now is, has still not received any mention. No NFT-specific guidance has been issued yet. […]Wed, 03 Nov 2021 17:27:44 GMThttps://cryptotaxcpa.com/is-crypto-interest-taxable/https://cryptotaxcpa.com/is-crypto-interest-taxable/Yes, interest earned on crypto is taxable income. Crypto Interest Taxation This is true regardless of where it is held. The most common scenarios we run into: Through short-term P2P (peer-to-peer) lending on a platform like KuCoin Given as deposit rewards on centralized exchanges such as Nexo, Celsius, or Voyager In vaults, pools, or farms […]Tue, 02 Nov 2021 16:23:22 GMThttps://cryptotaxcpa.com/how-is-staking-income-taxed/https://cryptotaxcpa.com/how-is-staking-income-taxed/In this article we are going to be speaking specifically for people who hold proof-of-stake (PoS) tokens as delegators, not those who are operating full-blown nodes as validators. We’ll discuss validators in a future article – as there are some interesting factors affecting them specifically – but the majority of crypto investors will only ever […]Mon, 01 Nov 2021 16:45:20 GMThttps://cryptotaxcpa.com/how-are-crypto-mining-profits-taxed/https://cryptotaxcpa.com/how-are-crypto-mining-profits-taxed/Not all crypto is taxed the same way. Each category of cryptocurrency income has its own rules that must be followed. These different types of blockchain income are all taxed differently. And crypto mining is probably one of the “most different” of the bunch. Mining Compared to Other Crypto Income Most other types of cryptocurrency […]Fri, 29 Oct 2021 19:48:14 GMThttps://cryptotaxcpa.com/crypto-capital-gains/https://cryptotaxcpa.com/crypto-capital-gains/As we’ve noted before, each time you trade one crypto token for another a capital gain or loss is created. And you need to report that income on your tax return – regardless of whether or not you convert it back into a fiat currency. Capital Gains Holding Period Resets Savvy blockchain investors are aware […]Thu, 28 Oct 2021 19:34:19 GMThttps://cryptotaxcpa.com/how-are-crypto-trades-taxed/https://cryptotaxcpa.com/how-are-crypto-trades-taxed/In crypto circles, one of the most common sentiments is that crypto trading and profits are not taxable until you convert them back into a fiat currency. “Yeah, but you don’t pay taxes until you trade it back for USD. So long as you don’t cash out you don’t have to pay anything!” That would […]Wed, 27 Oct 2021 17:31:28 GMThttps://cryptotaxcpa.com/how-are-gala-node-earnings-taxed/https://cryptotaxcpa.com/how-are-gala-node-earnings-taxed/If you’ve recently purchased a Gala Games node, you may be wondering how these earnings will be taxed. And if you aren’t, you should be. Not fully understanding how crypto is taxed – especially given the volatility in the market and corresponding potential for big gains and big losses – can cost you a lot of money in […]Sun, 24 Oct 2021 18:19:25 GMT