Cryptocurrencies, including NFTs, are treated as “property” for tax purposes in the United States
In general, profits from digital assets are subject to capital gains tax, similar to stocks
However, cryptocurrencies received from certain activities are treated as income and are subject to income tax.
Capital gains tax on cryptocurrencies is paid:
- Selling cryptocurrencies for fiat (US dollar, Japanese yen, etc.).
- Sending cryptocurrency as a gift (anything over $15,000 for tax year 2021).
- Buying goods and services with cryptocurrencies, even small purchases like buying coffee.
- Trading or exchanging one digital asset for another. This includes buying NFTs using cryptocurrencies
The tax is paid on any capital gain, it is calculated as the difference between the price paid for an asset and the price at which it was sold
Cryptocurrency income tax is payable in the following cases:
– Receive cryptocurrency from an airdrop
– Any cryptocurrency interest income from DeFi lending.
– Income from cryptocurrency mining through block rewards and transaction fees.
– Cryptocurrency earned on liquidity pools
– Receiving cryptocurrency as a means of payment for the performance of work
What are the taxes on cryptocurrencies in the US?
Everything here is divided into two parts:
Short-term capital gains.
Profit from a crypto asset held for less than a year is taxable