Cryptocurrency Taxation
Definition
The IRS treats cryptocurrency as property, not currency. Selling, trading, or using crypto to buy goods/services creates a taxable event. Capital gains rules apply: short-term (held under 1 year) taxed at ordinary rates, long-term (over 1 year) at preferential rates. Mining and staking income are taxed as ordinary income when received. Starting in 2025, crypto brokers must issue Form 1099-DA reporting transactions.
Example
You bought 1 Bitcoin for $30,000 and sold it 14 months later for $55,000. Your $25,000 long-term capital gain would be taxed at 15% (for most taxpayers), meaning approximately $3,750 in tax.