Understanding the fundamentals of cryptocurrency taxation and your obligations as an investor
Cryptocurrency taxation can be complex, but understanding the basics is essential for every crypto investor. In most jurisdictions, cryptocurrencies are treated as property for tax purposes, meaning that transactions involving crypto can trigger taxable events.
This guide covers the fundamental concepts of crypto taxation, helping you understand when taxes apply, what records to keep, and how to stay compliant with tax authorities.
When you sell cryptocurrency for traditional currency (USD, EUR, etc.), you realize a capital gain or loss based on the difference between your purchase price and sale price.
Exchanging one cryptocurrency for another is also a taxable event. You must calculate the fair market value of both cryptocurrencies at the time of the trade.
Spending cryptocurrency to buy goods or services is treated as selling the crypto for its fair market value, potentially triggering capital gains tax.
Cryptocurrency received as income (mining, staking rewards, airdrops, salary) is taxed as ordinary income at its fair market value when received.
Cryptocurrency taxation is complex and varies by jurisdiction. Consider consulting with a tax professional who specializes in cryptocurrency to ensure compliance and optimize your tax strategy.