• US Citizens and IRS Notice
• How Crypto Capital Gain Tax Rate Calculated in US?
• When do US citizens need to pay taxes on cryptocurrencies?

US citizens and IRS notice

US citizens engaged in cryptocurrencies during the 2021 tax year are now expected to file a tax return with the IRS. Taxpayers may file their taxes between January 24th and April 18th, and will be fined for filing after the deadline.

Cryptocurrencies, including non-fungible tokens (NFTs), will continue to be treated as tax “property” in the United States. This was initially determined by the IRS in a notice issued in 2014, which means that most taxable actions related to digital assets are subject to capital gains taxes similar to equity taxation.  However, cryptocurrencies obtained from the selected activity will be treated as income and will be subject to income tax.

How crypto capital gain tax rate calculated in US?

US authorities don’t set a specific crypto Capital Gains Tax rate. The capital gains tax rate you will pay on your cryptocurrency depends on how long you hold your asset and how much money you make from it.

• If you hold virtual currency for less than a year, you will qualify for a short-term capital gains tax rate.
• If you hold crypto for more than a year, you will be exposed to the long-term capital gains tax rate.

Short-term capital gains tax rate

Short-term capital gains, you will pay the same tax percent as you do with your regular income. For short-term gains, your crypto taxation rate can be as small as 10% or as high as 37%. This depends on several factors, including your marital status (single or married), the amount of annual income, married and filing jointly, or married and filing separately.

long-term capital gains tax rate

Long-term capital gains tax for cryptocurrency is significantly lower varying from 15% up to 20%. The final tax deduction will also depend on the same factors as with short-term capital gains.

When do US citizens need to pay taxes on cryptocurrencies?

• Selling cryptocurrency for fiat (U.S. dollar, Japanese yen, etc.).
• Sending cryptocurrency as a gift (anything over $15,000 for the 2021 tax year).
• Purchasing goods and services with cryptocurrency, even small purchases like buying a coffee.
• Trading or swapping one digital asset for another. This includes purchasing NFTs using cryptocurrencies.

To calculate the cryptocurrency capital gains, simply subtract the cryptocurrency selling price from the cost base adjusted at the time of the transaction. Adjusted cost basis (ACB) is simply the book value or original cost of an asset.

Profit or loss resulting from speculation of digital assets held for less than 12 months is taxed at the applicable high tax rate on taxable income. Losses incurred through cryptocurrencies can be used to offset income tax for a particular reporting tax year up to $3,000.