Cryptocurrency Tax Calculator – Forbes Advisor

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Do you have to pay tax on crypto?

Even though cryptocurrencies were designed to be decentralized and free from government control, Uncle Sam still expects his fair share at tax time. This means that you may owe taxes if your coins have increased in value, whether you use them as an investment or as a cash-out.

Use our crypto tax calculator below to determine how much tax you could pay on the cryptos you sold, spent, or traded.

Calculator Disclaimer: Calculations are estimates based on current tax law as of February 2022. These rates are subject to change. Check the IRS website for the latest information on virtual currency earnings.

How is cryptocurrency taxed?

Generally, the IRS taxes cryptocurrency like property and investments, not currency. This means that all transactions, from selling coins to using cryptos for purchases, are subject to the same tax treatment as other capital gains and losses.

For this reason, long-term crypto investors have a valuable opportunity: if they hold their coins for at least a year, they can benefit from lower long-term capital gains taxes, which range from 0% to 20%, depending on your income level. Short-term crypto gains on purchases held for less than a year are subject to the same tax rates you pay on all other income: 10% to 37% in 2022, depending on your federal tax bracket on the revenue.

These taxes apply even if you use the crypto to make purchases, which means you may be liable for sales tax plus taxes on any gains your crypto has made since you bought it or received it for sale. first time.

You may also owe taxes on crypto if you earn it by mining cryptocurrency or receive it in exchange for goods and services. In these cases, it is taxed at your ordinary tax rates, based on the value of the crypto on the day you receive it. (You may have to pay taxes if you later sell the crypto you mined or received at a profit.)

How to declare cryptocurrency on taxes

You will need to report any gain (or loss) you make when buying and selling cryptocurrency to the IRS. Fortunately, many cryptocurrency exchanges provide transaction reports that include all buy, sell, and trade transactions that occur on your account.

If all of your crypto transactions happen on a single exchange, it should be easy to collect the information you need to report cryptocurrency on your tax return. However, if you have crypto transactions on multiple exchanges, crypto wallets, or crypto credit cards, things can get more complicated. You will need to get a report of each location where a transaction took place or track the transactions yourself.

To simplify this process, crypto-focused tax software like CoinTracker or TokenTax allows you to capture all your crypto transactions on all the exchanges you use and generate a cost basis report for easy tax reporting. (These programs may charge a fee for their services.)

Once you have collected all of your crypto transactions, you must report them on IRS Form 8949, Sales and Other Dispositions of Capital Assets. This form is divided into two sections: short-term (for cryptos held for one year or less) and long-term (for cryptos held for more than one year).

Take your total short-term and long-term capital gains and enter them on Schedule D, Capital Gains and Losses.

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