Cryptocurrency Tax Rules for Investors

Cryptocurrency taxation rules for investors: Tax Treatment: Property, Not Currency: IRS treats crypto as property for tax purposes. Capital Asset: Gains/losses are capital unless trading as business. Taxable Events: Sales for Cash: Gain/loss = proceeds minus basis. Crypto-to-Crypto Trades: Taxable exchange, not like-kind treatment. Use as Payment: Spending crypto triggers gain/loss calculation. Mining/Staking Rewards: Ordinary income at fair market value when received. Hard Forks/Airdrops: Income when you have dominion and control. Gain/Loss Calculation: Basis: Cost of acquisition plus fees. Holding Period: Long-term (>1 year) vs. short-term capital gains rates. Cost Basis Methods: FIFO, LIFO, specific identification (if tracking available). Record Keeping: Required Information: Date acquired, purchase price, date sold, sale price, fees paid. Documentation: Exchange records, wallet addresses, transaction hashes. Form Reporting: Schedule D: Capital gains and losses. Form 8949: Detailed transaction reporting. Schedule 1: Mining income as other income. Common Issues: Missing Basis Information: Exchanges may not provide adequate records. DeFi Transactions: Complex protocols create tracking challenges. Tax Software: Consider crypto-specific tax software for complex portfolios.