The crypto tax deadline in the US is coming on April 15, with CoinTracking offering the easiest fully-fledged solution for over 1.5 million investors to do their crypto taxes.
The US leads in crypto adoption and taxes
CoinTracking, the leading crypto tax software, is helping more than 1.5 million customers worldwide track their crypto portfolio and do their crypto taxes.
CoinTracking has been supporting US investors since the gecko to keep track of all the requirements imposed by the IRS and become fully compliant each tax season, with this large market contributing to the surge in our user base.
The continuous change of rules for crypto taxation and the increased oversight of tax authorities like the IRS is leading investors to search for a streamlined solution that can track their entire portfolio and enable them to generate the right tax forms to report crypto gains and income.
Meanwhile, the US is a leader in crypto adoption worldwide, with the most traded volume by far ($1,000+ billion) and research indicating that 13% of the population owns some form of cryptocurrency. These figures translated into over 33 million Americans owning cryptocurrency, while other estimations point to over 35% of the population owning the leading digital asset, Bitcoin, and over 25% of people owning Ethereum.
Despite leading adoption, the US taxes cryptocurrencies on different levels
With so much adoption, tax authorities in the US couldn’t leave these assets out of the tax code. The US was one of the first countries to launch a tax code for investors dealing with cryptocurrencies as early as 2014. Cryptocurrencies like Bitcoin are considered property by the IRS, and the US taxes any gains and income deriving from them, from capital gains to income taxes.
As a general rule, investors in the US dealing with cryptocurrency trading should know that the gains they have from it will be taxed at a long-term or short-term capital gains tax rate, ranging from 0% to 37%. Even if investors only have losses from crypto trading, they still have to report those in their crypto taxes. For gains and losses, investors have to file forms like Form 1040 (Income Tax Return), Form 8949 and Schedule D.
The US has a very complex tax code for cryptocurrencies, with investors having several taxable transactions. For example, the US taxes all crypto trades, including crypto-to-FIAT (e.g., Bitcoin to USD) and crypto-to-crypto trades (e.g., Bitcoin to Ethereum).
Trades between crypto and Non-fungible tokens (NFTs) are also taxable. If investors trade NFTs for FIAT (e.g., USD) or other cryptocurrencies, they would have to determine the gain/loss on each trade as they do with regular crypto trades (to FIAT or other digital assets).
Another taxable event that investors sometimes miss is when they purchase something (e.g., product, service) with cryptocurrencies. When investors spend crypto, US tax authorities see it as a disposal, similar to selling crypto for another crypto or FIAT. In this case, investors need to determine the gain/loss on that crypto used for the purchase and report it.
Tracking these transactions is quite complicated, but crypto tax software like CoinTracking can do it automatically. Unfortunately, crypto taxation in the US doesn’t end there.
From NFTs to DeFi, almost everything in crypto is being taxed by US authorities. When it comes to earning activities, any form of cryptocurrency-derived income is taxed at an income tax level, while the tax rate will depend on each investor’s income tax level bracket.
These income-derived taxable transactions include crypto airdrops, new coins from hard forks, salaries paid in cryptocurrency, freelance/contractor payments made with digital assets, earning staking rewards, receiving any coins from crypto interest-earning vehicles, crypto mining rewards, selling NFTs as a creator, and much more.
Investors in the US need to track the Fair Market Value (in USD) of every batch of crypto income they receive, from staking rewards to crypto interest and salaries, and report that income.
Investors earning crypto income will have to report all that on Form 1040, the US Individual Income tax Return, and some other forms.
The IRS can track cryptocurrencies
The IRS and other tax authorities, from the European Union to Australia, have all the resources to track crypto holdings, including employing legal resources to summon crypto brokers operating to US investors. The IRS is expanding its workforce to come after cryptocurrency investors without unreported crypto or unpaid taxes.
Investors must track their cryptocurrencies and report when they incur taxable events in the US regardless of the amounts involved, crypto brokers used, etc.
If investors don’t have their crypto tracked, the IRS can assume that all of their gains are short-term ones, leading investors to pay higher tax rates than they need to. This is only caused by a lack of proper portfolio tracking.
For reporting purposes, investors should always keep records of their transactions, including:
- The date they acquired the crypto assets;
- The date they disposed of the assets;
- The date they earned any crypto income;
- The Fair Market Value (in USD) of their holdings and income;
- The sales proceeds on their trades;
- The gain/loss on each crypto transaction.
A crypto tax software and a CPA can easily track all of this information for investors.
Tracking crypto income and gains is easy with CoinTracking
With so many rules, how can crypto holders become compliant? With crypto tax software, investors can track all of their gains and income while generating the right tax reports to file their crypto taxes in the US!
Investors can do their crypto taxes with CoinTracking in 3 simple steps:
- Investors can import their trades from hundreds of crypto exchanges (API/CSV) operating in the US, wallets, and blockchain networks;
- From there, CoinTracking determines the capital gains/losses of all their trades and the income from earning activities;
- Generate fully compliant tax reports according to the approved accounting method in the US (e.g., FIFO).
Following those steps, investors can easily use the many integrations of CoinTracking (e.g., TurboTax) to file their crypto taxes in the US.
Those looking to take advantage of what CoinTracking has to offer will find 25+ advanced reporting features to track and analyze their portfolios. One of the key features of CoinTracking is the ability to show which coins in portfolios can be eligible for a reduced tax rate based on their holding period.
Countries like the US offer tax advantages for long-term investors by establishing a long-term capital gains tax rate, ranging from 0% to 20%, instead of a higher tax rate (short-term capital gains tax rate). This feature is key for investors looking to optimize their crypto taxes without any extra effort on their part.
Investors can enjoy some tax breaks, but they have to track their holdings
Even though the US taxes most crypto-related transactions, there are a few crypto-tax-free events, including:
- Buying crypto: Investors can buy crypto with FIAT (e.g., USD) without having a taxable event. However, if they sell any portion of their holdings, they’d face a taxable event.
- Transferring crypto: Transferring cryptocurrencies between personal wallets is not a taxable event in the US. Investors can do it as many times as they want.
- Gifting crypto: Gifting cryptocurrencies to friends or family is not a taxable event in the US. However, if the gift surpasses the annual exclusion amount ($18,000 in 2024), investors have to file a gift tax return.
- Holding crypto: Holding crypto for as long as investors wish is not a taxable event.
Investors should always track their trades to prove that they are not taxable. Moreover, there are also some ways for investors to reduce their crypto taxes (but they have to keep track of it to get these benefits), including:
- Hold crypto in the long-term: Holding crypto for over 12 months before selling turns investors eligible for a long-term capital gains tax rate in the US, ranging from 0% to 20% depending on their personal situation, paying less in taxes if they were to hold crypto for less than 12 months before selling it.
- Donate crypto: Donating crypto is one of the ways to reduce capital gains by deducting the amount of crypto investors donated. Investors can claim an itemized tax deduction when they donate to a qualified charitable organization in the US.
- Crypto tax loss harvesting: Investors may have coins that have lost most of their value, and it could be more advantageous to realize those losses than to keep the coin and hope for it to recover. In that case, investors should realize those losses and reduce their other capital gains to reduce their entire crypto tax bill.
- Move to an income tax-free state: US states like Florida, Texas, Tennessee, Nevada, or Wyoming offer no income taxes for investors, enabling them to reduce their total crypto taxes.
- Move to a crypto-friendly country: Investors can reduce or eliminate crypto taxes by moving to a crypto-tax-free country like the United Arab Emirates, El Salvador, or Puerto Rico. Other countries like Germany, Portugal, and Malta also offer interest tax breaks for crypto investors.
Any of the ways to reduce crypto taxes have the underlying assumption of keeping track of transactions to prove the eligibility of the tax benefits investors are using.
Introducing CoinTracking Full-Service in the US: The hands-off solution for crypto taxes
CoinTracking is coming to the rescue of professional investors with thousands of trades and not so much time to organize their entire portfolios and do their taxes. CoinTracking can take care of their entire crypto taxes and let investors focus on what they do best: realizing profits.
To address those issues, CoinTracking has been boosting its Full-Service, where a team of CoinTracking experts and partner crypto tax firms in the US will review investors’ accounts, track their gains/losses and income, fix any errors they might have, propose improvements, and ensure they generate correct tax reports to file their crypto taxes.
With Full-Service, investors can enjoy a 100% hands-free process, focus on their trading instead of changing tax rules, and get their crypto taxes done for them.
If investors don’t have thousands of trades to track but still need help clarifying questions, our Full-Service offers other packages like a support call, an account review, and other services targeted to their needs.
“CoinTracking has been helping US investors since the beginning as the biggest crypto market, and we’re making it a priority for 2024 as more demands are on investor shoulders,”
- Dario Kachel, founder and CEO of CoinTracking.
About CoinTracking
CoinTracking is the leading cryptocurrency tax software and portfolio tracker, supporting over 1.5 million customers worldwide.
With CoinTracking, investors can import their crypto transactions, track their crypto gains/losses, generate tax reports, and much more.
To learn more about CoinTracking and its services and features, readers are encouraged to check out Coin Bureau's CoinTracking Review.
Press contact:
Agnieszka Mojsiej
Marketing Manager, CoinTracking
Disclaimer: The publication of a paid press release on this page should not be viewed as an endorsement by the Coin Bureau or its affiliated entities. Readers should do their own research before investing funds in any company or service.
