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- What is the cryptocurrency tax rate?
- What tax rate will I pay on cryptocurrency?
- How do crypto tax brackets work?
- Capital gains vs. income tax events
- What tax rates do I pay on NFTs?
- Can I reduce my income and get to a lower tax bracket?
- Are there other ways I can reduce my cryptocurrency taxes?
- How does the IRS track crypto?
- Do I have to pay net investment income tax (NIIT)?
- Get started with cryptocurrency tax software
Key takeaways
- When you sell or dispose of cryptocurrency, you’ll pay capital gains tax — just as you would on stocks and other forms of property.
- The tax rate is 0-20% for cryptocurrency held for more than a year and 10-37% for cryptocurrency held for less than a year.
Wondering how much you’ll need to pay in cryptocurrency taxes? Let’s break down how much money you’ll owe to the IRS in different scenarios.
What is the cryptocurrency tax rate?
Depending on your specific circumstances, cryptocurrency can be taxed as long-term capital gains, short-term capital gains, or ordinary income.
Ordinary income tax: If you earn cryptocurrency — whether through your job, mining, staking, or airdrops — you’ll recognize ordinary income subject to income tax. This can range from 10% - 37% depending on your income level.
Meanwhile, cryptocurrency disposals are subject to capital gains tax. Examples of disposals include selling crypto, trading your crypto for other cryptocurrencies, or making a purchase with crypto.
Long-term capital gains tax: If you’ve held cryptocurrency for more than a year, your disposals will be subject to long-term capital gains tax. This ranges from 0%-20% depending on your income level.
Short-term capital gains tax: If you’ve held your cryptocurrency for less than a year, your disposals will be subject to short-term capital gains tax. For tax purposes, this is treated the same as ordinary income and can range from 10% - 37% depending on your income level.
What tax rate will I pay on cryptocurrency?
The tax rate you pay on cryptocurrency varies depending on several factors, including your income level and how long you held your crypto.
Because of inflation, tax brackets have been adjusted upwards for the 2024 tax year. If your income has remained the same, it’s possible that you may be in a lower tax bracket.
Long-term capital gains tax rate
If you disposed of your cryptocurrency after more than 12 months of holding, you’ll be taxed at the long-term capital gains rate. Here’s a breakdown of tax rates by income level.
Short-term capital gains/ordinary income tax rate
If you’ve disposed of cryptocurrency after less than 12 months of holding OR earned cryptocurrency income, you’ll need to pay ordinary income tax. Here’s a breakdown of tax rates by income level.
Not sure how much you’ll be paying in crypto taxes? Check out our free crypto tax calculator.
How do crypto tax brackets work?
It’s important to remember that most taxpayers don’t pay a single flat tax rate on their entire income. Instead, they pay progressively higher tax rates on different portions of income.
For example, a taxpayer who earned $25,000 income won’t pay a flat 12% tax. Instead, they’ll pay 10% on the first $11,600 and 12% on the next $13,400.
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Capital gains vs. income tax events
Not sure whether your crypto transactions should count as a capital gain or income tax event? Let’s run through a few common scenarios.
When do I pay capital gains tax on crypto?
Trading your cryptocurrency for fiat.
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Trading your cryptocurrency for other cryptocurrency.
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Using cryptocurrency to buy goods and services.
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When do I pay income tax on crypto?
Below includes a list of income events common for crypto users.
- Receiving cryptocurrency as a referral bonus.
- Receiving cryptocurrency in an airdrop.
- Earning cryptocurrency interest.
- Receiving a paycheck in cryptocurrency.
- Earning cryptocurrency from staking and/or mining.
What tax rates do I pay on NFTs?
NFTs are taxed similarly to other crypto-assets. When you dispose of an NFT, you’ll incur a capital gain or a loss based on how the price of your NFT changed since you originally received it.
If your NFT is considered a collectible, you’ll pay the collectible tax rate of 28% on long-term NFT gains.
For more information, check out our guide to NFT taxes.
Can I reduce my income and get to a lower tax bracket?
Itemized deductions can reduce your tax bill for the year.
In some cases, deductions can reduce your taxable income to the point where you may fall into a lower tax bracket. For example, if you have $40,000 of income for the year and claim $16,000 worth of itemized deductions, your taxable income will fall to $24,000.
Examples of itemized deductions include amounts paid for cryptocurrency donations, mortgage interest, and state/local tax paid.
Remember, itemized deductions will only reduce your tax bill if their sum is greater than the standard deduction available to you.
Frequently asked questions
- Do I have to pay tax on cryptocurrency?
- How is cryptocurrency taxed in the United States?
- Is crypto taxed as capital gains?
- How do I avoid capital gains tax on crypto?
- How is cryptocurrency tax calculated?
- How do I pay taxes on crypto?
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How we reviewed this article
All CoinLedger articles go through a rigorous review process before publication. Learn more about the CoinLedger Editorial Process.
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CoinLedger has strict sourcing guidelines for our content. Our content is based on direct interviews with tax experts, guidance from tax agencies, and articles from reputable news outlets.
