How to File Crypto Taxes on Your Tax Return

Paying crypto taxes for capital gains

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 crypto (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 and services, any capital gain or loss recognized is also included. Unsure what transactions are taxable events? Check out our getting started guide for crypto tax.

For each 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. This form is used for other capital assets as well, like stocks, so you may have separate 8949s for other such assets.

Form 8949 filled out with TokenTax crypto tax data

TokenTax automatically calculates and generates the Form 8949 based off of your crypto transaction history. You can create the 8949 in PDF or CSV format.

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 aand losses from other related sources, like 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. 

Crypto tax software like TokenTax automatically generates the Form 8949 for tax filing, and it also tells you what your estimated tax liability is. The amount you’ll ultimately owe on your cryptocurrency taxes depends on your tax rates

How to pay tax on crypto income

In many cases, you recognize crypto as ordinary income rather than capital gains. Situations where crypto is recognized as income include crypto mining, crypto received in hard forks and airdrops, and crypto staking. 

IRS form 1040 Schedule 1 "Additional Income and Adjustments to Income"

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.” The total amount of income from most crypto income situations like coins received in forks, airdropped coins, mining rewards, and staking rewards should go on Line 21 “Other Income.”

TokenTax calculates this total from your transaction data and shows it on the dashboard.

Is your crypto income self employment income?

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.

Calculate your crypto taxes now

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