The Complete Guide to Filing Cryptocurrency Taxes
Cryptocurrency tax reporting is required by the IRS. Learn exactly how to file crypto taxes with the Form 8949, 1040 Schedule D, and more
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Welcome to our guide on how to file cryptocurrency taxes! We will tell you all you need to know about properly reporting your cryptocurrency capital gains, capital losses, and income. Note that this guide applies to U.S. tax filers.
If you're not sure how exactly crypto is taxed in the first place, be sure to read our guide on how crypto taxes work first to learn the basics!
While paying crypto taxes may seem daunting at first, you report crypto taxes just like how you report other capital assets like stocks. Remember that, for tax purposes, crypto is treated as property. You are required to report your crypto taxes on your tax return.
You report your cryptocurrency taxes via the IRS Form 8949, Schedule D, and if necessary, the 1040 Schedule 1 and / or 1040 Schedule C. Ahead, we'll go into detail in how these forms are used and in which situations you'd use each form.
- Sign up for a crypto tax calculator like TokenTax and import all your crypto trade data.
- Once you've calculated your crypto taxes, create and download your Form 8949.
- Include your totals from your Form 8949 onto your Form Schedule D, as per the form's instructions.
- If you have crypto income, include the crypto income totals on the 1040 Schedule 1 (if you are engaging in crypto activities as self-employed, use the Schedule C instead).
- Complete the rest of your tax return, file, and you’re done.
Below, we’ll go over each tax form in detail, giving you all the info that you need to be able to file your crypto taxes like a pro.
The most prominent tax form used for reporting crypto tax is the Form 8949 “Sales and Other Dispositions of Capital Assets.” This IRS form lists out your sales of virtual currencies (taxable events) and their capital gains or losses.
Every taxable crypto transaction during the tax year is represented on this form. If you used crypto to pay for goods or services, any capital gain or loss recognized on those assets spent is also included.
If you’re unsure what crypto transactions are taxable, be sure to check out our crypto tax getting started guide for a rundown of how exactly crypto is taxed.
For each virtual currency transaction, the Form 8949 has the cost basis and date acquired as well as the date sold and proceeds. The proceeds minus the cost basis give you the gain or loss, which is also listed. Lastly, the holding period — short or long term — is listed.
This form is used for other capital assets as well, like stocks, so you may have separate 8949s for other such assets.
Our crypto tax software automatically calculates and generates the Form 8949 based off of your crypto transaction history. You can create the 8949 in PDF or CSV format, or create a file for easy import into TurboTax.
The Form 8949 is included with the Form 1040 Schedule D, which reports your overall capital gains and losses. On this form, you list your totals separately for short term and long term capital gains and losses.
It also includes gains and losses from other capital assets as well as figures from Form 8824 (for like-kind transactions) and from Schedule K-1s via businesses, estates, and trusts.
Within the Schedule D, you can elect to include capital losses carried forward from previous years as well as capital losses that you wish to carry forward to future years.
As of 2019, the Form 1040 Schedule 1 now asks whether you have held or traded crypto. At the top it reads, “At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” If you owned or transacted crypto in 2019, then it’s a safe choice to check yes on this form and include it with your tax return, even if you otherwise don’t need to fill in the form.
The Form 1040 Schedule 1 is otherwise commonly used in crypto taxes to report income made in crypto.
In some cases, you recognize crypto as ordinary income rather than capital gains. Situations where crypto is recognized as income include crypto mining and staking, hard forks and airdrops, and crypto lending interest.
Crypto income that you’ve received personally (i.e. not as a self employed person) is included in the Form 1040 Schedule 1 “Additional Income and Adjustments to Income.” Your crypto income total for the tax year is entered on line 8 "Other income."
TokenTax calculates this total from your transaction data and shows it on the dashboard for each tax year, so you’ll know exactly how much income you need to report on your Form 1040 Schedule 1.
If your crypto income activities constitute self employment, then you’ll instead need to put that income on a Form 1040 Schedule C and pay self-employment tax. Self-employment tax accounts for the Social Security and Medicare taxes usually withheld from employee paychecks.
You are self employed if you conduct business as a sole proprietor, independent contractor, member of a partnership, or are otherwise conducting business for yourself. You may be self employed if you having a crypto mining operation or if you are conducting activity with crypto via a business. Consult a tax professional to be certain about your situation.
You may be able to deduct expenses from your self employment income. For example, if you have a mining operation, it’s possible to deduct expenses of your equipment and electricity bill (if metered separately).
You may also be able to deduct expenses if you’ve used your home for this hypothetical mining operation, i.e. you’ve devoted a whole spare room to the mining rigs. In this case, you can refer to Form 8829 “Expenses for Business Use of Your Home.”
We work with our full tax filing clients to help them with crypto self employment situations, like deductions for business use of their home.