How is crypto taxed?

In the U.S., crypto is considered a digital asset, and the IRS treats it generally like stocks, bonds, and other capital assets. Like these assets, the money you gain from crypto is taxed at different rates, either as capital gains or as income, depending on how you got your crypto and how long you held on to it.

What are some capital gains tax events involving cryptocurrencies?

Capital gains tax events involving cryptocurrencies include: Selling cryptocurrency for fiat (U.S. dollar, Japanese yen, etc.). Sending cryptocurrency as a gift (anything over $15,000 for the 2021 tax year). Purchasing goods and services with cryptocurrency, even small purchases like buying a coffee.

Do crypto-rich Americans pay tax in Puerto Rico?

Crypto-rich Americans are basing themselves in Puerto Rico for favorable tax regulations. (Pexels) Larren explains that, due to a 2012 law called Act 60, companies moving to or establishing themselves in Puerto Rico can pay a corporate tax of 4% — far lower than on the mainland. There’s also a 0% capital gains tax.

Should you disclose your crypto trading activity to the IRS?

“Disclosure is key when it comes to the IRS. At the end of the day, potential penalties could be way more than paying the tax on the crypto activity you engaged in.” Usually if you make a good faith effort to disclose your trading activity, you won’t have any issues, he notes. About the author: Kurt Woock is a writer at NerdWallet.