Which Taxes Apply?
Cryptocurrency is an example of “convertible virtual currency” as it can be digitally traded between users and purchased or exchanged into US Dollars and other real/virtual currencies. The sale, exchange, or use of any convertible virtual currency to pay for goods or services in a real-world transaction has tax consequences.
In the US, most cryptocurrency taxes fall into two categories: capital gains and ordinary income.
Disposal/Activity Type | Capital Gains Tax | Ordinary Income Tax |
|---|---|---|
✅ | ❌ | |
✅ | ❌ | |
✅ | ❌ | |
❌ (If conditions met) | ❌ | |
❌ | ✅ | |
❌ | ✅ | |
❌ | ❌ | |
❌ | ✅ | |
❌ | ✅ | |
❌ | ✅ | |
❌ (Potential to claim capital losses) | ❌ | |
❌ | ✅ | |
✅ | ❌ | |
✅ | ✅ | |
❌ | ❌ | |
❌ | ✅ | |
❌ | ✅ | |
❌ | ✅ | |
❌ | ❌ | |
✅ | ✅ (for creators) | |
❌ | ✅ | |
❌ (if conditions met) | ❌ | |
❌ (if conditions met) | ❌ |