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How crypto is taxed in 2023
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Where you reside plays a key role in how your crypto is taxed. While the US taxes its citizens regardless of their location, certain crypto-friendly regions such as Puerto Rico provide advantages, and many other countries impose more favorable crypto tax rules.
Certain crypto activities are not taxable for US taxpayers, and there are typically legal methods to reduce your crypto taxes. Non-taxable events for US taxpayers include purchasing crypto with cash, transferring crypto between wallets, and gifting and donating crypto in some circumstances.
Crypto is taxed based on where you live
Where you reside is the most important factor when it comes to crypto taxes. Notably the United States is only one of two countries that taxes its citizens regardless of where they live, so US citizens must be mindful of this when living internationally. US taxpayers may also be subject to state taxes on crypto.
Cryptocurrency taxation varies globally, and several crypto tax free countries offer favorable tax conditions for crypto enthusiasts considering a long-term move. For US taxpayers, certain crypto friendly states offer advantages, with Puerto Rico being especially appealing to serious, long-term crypto investors.
What is a taxable event in crypto?
Crypto taxable events vary from country to country. International taxpayers can find more information in our helpful country guides. For US taxpayers, the IRS identifies the ensuing events as taxable occurrences:
Exchanging one cryptocurrency for another (e.g., BTC for SOL)
Using crypto to purchase products or services (e.g., BTC for a Tesla)
Selling cryptocurrency for fiat currency (e.g., BTC for USD)
Any other form of crypto disposal
The following may also lead to income tax liabilities:
Receiving crypto as payment for goods or services
Explore more: Everything you need to know about crypto taxes
What is considered a non taxable event in crypto?
For US taxpayers, a number of non taxable events typically occur when interacting with crypto. They include:
Purchasing cryptocurrency using cash
Transferring crypto between wallets you own
Gifting crypto worth $17,000 or less (for 2023)
Donating crypto to a qualified 501(c)(3) organization is not taxable and may qualify you for a tax deduction against gross income
Seek help to file your crypto taxes
Handling crypto taxes can be particularly complex due to various hurdles. Many platforms lack exportable trade histories, and even if available, the formatting varies widely. This disparity complicates the process of gathering and reporting taxable events. Notable challenges include:
Overlooking wallets where crypto might be stored
Difficulties accessing trade data due to defunct exchanges or geographic limitations
Errors arising from incomplete cost basis information
Importing inaccurate data from unsupported DeFi platforms
Challenges in attributing transactions from shared wallets
Complexities reporting data from margin trading
TokenTax's software helps crypto taxpayers through:
Real-time data compilation
Automated syncing with wallets and accounts
Comprehensive data analysis
Accurate cost basis calculation
Automatic gain/loss calculations
Tax form generation
Real-time tax liability display
A team of crypto tax experts
TokenTax provides our clients with crypto tax calculation software backed by a full-service crypto tax accounting firm. Get peace of mind this and every tax season, so you can focus less on taxes and more on making the most out of your crypto.
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