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  • Cryptocurrency Tax Guide for US Individuals
    • Virtual Currency & Cryptocurrency
    • Who are Recap?
  • CRYPTOCURRENCY TAX
    • Do I Need to Pay Tax on my Crypto?
    • Which Taxes Apply?
      • Capital Gains Tax (CGT)
      • Income Tax
      • Non-Taxable Transactions
    • How Much Tax Will I Pay?
    • Capital Gains Tax
      • Calculating the Capital Gains and Losses
      • Cost Basis Methods
      • Disposal proceeds
        • Non Taxable Events
        • Taxable Events
        • Donating cryptocurrency to a charitable organization
        • Gifting cryptocurrency to another person
    • Income Tax
      • Receiving cryptocurrency from mining
      • Receiving cryptocurrency rewards
      • Forks
      • Airdrops
      • Tax on Tokenswaps and Mainnetswaps
    • Deductibles and Reducing Capital Gains
  • TRANSACTION TYPES
    • ๐Ÿ’ทSelling Crypto for Fiat
    • ๐Ÿ›๏ธPurchases using Crypto
    • ๐Ÿ”„Exchanging one crypto for a different crypto
    • ๐ŸŽ—๏ธDonations to Qualified Charities
    • ๐ŸŽGifts
    • ๐ŸŽˆAirdrops
    • ๐ŸคStaking
    • ๐Ÿ’ธTransfers
    • ๐ŸดForks
    • โ›๏ธMining
    • ๐Ÿ‘›Employment income
    • ๐ŸšจLost & Stolen Crypto
    • ๐Ÿ’งLiquidity Pools
    • ๐Ÿ”ฎCryptoasset derivatives (CFDs, Futures and Margin Trading)
    • ๐Ÿ’ผCrypto Loans
    • ๐Ÿ’ŽLending Rewards
    • ๐ŸชžReflections Rewards
    • ๐Ÿ‘ฅReferral Income
    • ๐Ÿ’ณCashback
    • ๐ŸŽจNFTs (Non Fungible Tokens)
    • ๐ŸŽฎPlay-to-earn gaming NFTs
  • Record Keeping
  • Reporting Income and Gains to the IRS and Paying the Tax
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  1. CRYPTOCURRENCY TAX
  2. Which Taxes Apply?

Income Tax

PreviousCapital Gains Tax (CGT)NextNon-Taxable Transactions

Last updated 3 years ago

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In general, any cryptocurrency that you receive but have not โ€œboughtโ€ can be classified as ordinary income and should be reported under either the โ€œother incomeโ€ section, , or of your income tax return. The location on your tax return will depend on whether the income was from a trade or business, an isolated event, or passive activity.

These transactions generate ordinary income:

Note: Certain DeFi (or decentralized finance) rewards are considered ordinary income. Please consult your accountant or tax attorney for questions regarding your DeFi activity and its tax implications.

For individuals, think of ordinary income as your paycheck from your employer, any payments made to you for freelance work, receiving a gift containing fiat currency, etc. Currency received under these circumstances would be considered ordinary income and subject to the ordinary income tax rate.

For businesses, cryptocurrency could also be business income, which could allow you to deduct business expenses. Please consult your accountant or tax attorney for which items could be deducted from your tax liability.

A good rule of thumb for ordinary income is: If you sell or exchange cryptocurrency not held as a capital asset, you will realize ordinary gain or loss.[1] [2]

[1] I.R.S. Notice 2014-21, .

[2] I.R.S. Rev. Rul. 2019-24 .

https://www.irs.gov/pub/irs-drop/n-14-21.pdf
https://www.irs.gov/pub/irs-drop/rr-19-24.pdf
Schedule B
Schedule C
Airdrops
Getting
paid in cryptocurrencies for goods and services you provide
Staking Rewards
Mining Rewards