Do I Need to Pay Crypto Self-Employment Taxes?

Tynisa (Ty) Gaines
ByTynisa (Ty) Gaines, EAReviewed byArthur Teller, CPAUpdated on September 13, 2023 · minute read
VerifiedExpert verified

TokenTax content follows strict guidelines for editorial accuracy and integrity. We do not accept money from third party sites, so we can give you the most unbiased and accurate information possible.

In the United States, if you are self-employed, you need to pay self-employment taxes, an additional 15.3% tax that includes Medicare and Social Security taxes. Most salaried workers have half of this automatically deducted from their paychecks, with the other half being paid by their employer. However, if you're self-employed and don't have these deductions and payments made for you, the IRS still wants you to report and pay these taxes in a timely manner.

This means that if your crypto activities constitute “self-employment,” you’ll need to report and pay quarterly estimated taxes, including the 15.3% self-employment tax on top of ordinary income taxes. 

Do I need to pay crypto self-employment taxes?

According to the IRS, you’ll need to pay the 15.3% tax if your net earnings from self-employment were more than $400 in a tax year. But what constitutes “self-employment” versus a hobby? 

If your crypto activities generate income and represent a sizable portion of your total yearly earnings, and you run your operations in a business-like manner, they may be subject to self-employment taxes. Common situations this could apply to include:

For more on whether your crypto activities constitute self-employment, we recommend reading the IRS’ guidance and getting in touch with a crypto tax accountant.

Note that you do not pay self-employment taxes on crypto capital gains, as these are not considered "earned" income.

How do I pay crypto self-employment taxes?

The IRS wants taxes on income as soon as it’s earned. Because the self-employed don’t have federal taxes withheld from each paycheck, they must instead report and pay quarterly estimated taxes. Failing to do so can result in penalties and/or interest. 

Part of this worksheet is reporting what you expect your yearly gross income to be. This can be tricky for the self-employed, especially in the volatile crypto market. When calculating your crypto mining self-employment taxes, keep in mind the safe harbor rules and remember that overpayments will be refunded. If you’re struggling with your estimated quarterly payments, a crypto tax accountant can help. 

The IRS Form 1040ES is a tax form that will help you calculate what you owe each quarter. Once you’ve completed it, you’ll mail in your form and payment or simply pay taxes online

Form 1040ES

Business deductions from crypto self-employment taxes

Few people enjoy paying their self-employment taxes quarterly, but there are some benefits to your crypto income being considered self-employment income. Chiefly, you will be able to take deductions for your business expenses. This is particularly important for crypto miners, who may be able to get substantial tax deductions for their electricity and equipment expenses.

To stay up to date on the latest, follow TokenTax on Twitter @tokentax.

Tynisa (Ty) Gaines
Tynisa (Ty) GainesTax Expert at TokenTax
Tynisa (Ty) Gaines, EA has more than 20 years of experience as a tax professional. Ty has published numerous tax articles, two tax e-books, and an academic publication on cryptocurrency for the National Income Tax Workbook.
Arthur Teller
Reviewed byArthur TellerCOO (Former) at TokenTax
Arthur came to TokenTax after 12 years at KPMG. A specialist in partnership taxation and enterprise tax software, he is a licensed CPA in both California and Illinois and a member of the AICPA.

Get a personalized crypto tax consultation.

Complete our questionaire and we'll evaluate your situation — for free.

Let’s get started.

Check out our plans and pricing to find out which solution best meets your needs.

Review plans