Crypto Taxes
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Crypto Tax Rates: Complete Breakdown by Income Level 2023

Crypto Tax Rates: Complete Breakdown by Income Level 2023
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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.

How much tax do I pay on my crypto capital gains? 

The tax rate you pay on cryptocurrency varies depending on several factors, including your income level and how long you held your crypto.

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.  

capital gains tax rates 2022

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. 

income tax rates 2022

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 of income won’t pay a flat 12% tax. Instead, they’ll pay 10% on the first $10,275 and 12% on the next $14,725.

progressive taxation

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. 

Crypto gains tax rate

Trading your cryptocurrency for other cryptocurrency. 

Crypto to crypto tax rate

Using cryptocurrency to buy goods and services. 

Paying for goods with crypto taxes

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.

Do I have to pay net investment income tax (NIIT)? 

Some highly-successful crypto investors are required to pay an additional 3.8% tax on their net investment income. 

Net investment income is the total amount you’ve earned from all your investments — including income from bonds, stocks, mutual funds and crypto. Your net investment income is calculated by adding together capital gains, interest and dividends, and any income from your cryptocurrency investments. 

It’s important to note that the vast majority of crypto investors will likely not be required to pay NIIT. The tax only applies if you’ve reached the following thresholds of net investment income.

NIIT by filing status

Can I reduce my income and get to a lower tax bracket? 

Itemized deductions can reduce your tax bill for the year. 

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. In some cases, deductions can reduce your taxable income to the point where you may fall into a lower marginal tax bracket. 

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. 

Are there other ways I can reduce my cryptocurrency taxes? 

Here are a few strategies that can help you save money on your crypto tax bill. 

Realize profits in low-income years 

The higher your taxable income, the more taxes you’ll pay on capital gains. As a result, many investors choose to realize profits in years when their income is low — for example, when they are in-between jobs or in school full-time. 

Take advantage of long-term capital gains

Remember, the tax rate for long-term capital gains is significantly lower than the tax rate for short-term capital gains. As a result, simply holding your assets for longer than 12 months can significantly reduce your tax bill. 

Harvest your capital losses 

Selling your cryptocurrency at a loss comes with tax benefits. 

Capital losses can offset capital gains and up to $3,000 of ordinary income. Net losses exceeding $3,000 can be rolled forward into future years. 

It’s important to note that cryptocurrency has a unique advantage when it comes to tax loss harvesting. 

In the United States, stocks are subject to a wash sale rule which states that investors cannot claim losses if they buy back their shares within 30 days. However, this rule currently does not likely apply to cryptocurrency. 

For more tips, check out our complete guide on reducing your crypto taxes.

Get started with cryptocurrency tax software 

If you're looking for an easy way to file your cryptocurrency taxes, cryptocurrency tax software like CoinLedger can help. You can connect your wallets and exchanges and generate a complete crypto tax report in minutes.

More than 400,000 investors around the globe use CoinLedger to take the stress out of tax season. 

Get started with a free account today.

Frequently asked questions 

Let’s take some time to answer a few commonly asked questions about cryptocurrency taxes. 

Do I have to pay tax on cryptocurrency? 

Yes. Cryptocurrency is subject to capital gains and income tax. Tax evasion is punishable by a fine of up to $250,000 and possible jail time. 

How is cryptocurrency taxed in the United States? 

In the United States, cryptocurrency is considered a form of property.  You’re taxed when you earn cryptocurrency or dispose of it. 

Is crypto taxed as capital gains? 

Disposals of cryptocurrency are subject to capital gains tax. 

How do I avoid capital gains tax on crypto? 

While there’s no way to legally evade capital gains tax on cryptocurrency, you can reduce your tax bill with strategies like tax-loss harvesting

How is cryptocurrency tax calculated? 

How much you pay in cryptocurrency taxes is dependent on several factors such as your income level, how long you’ve held your cryptocurrency, and your total crypto gains/losses. 

How do I pay taxes on crypto? 

The easiest way to accurately report and pay taxes on crypto transactions across multiple exchanges and wallets is to use a crypto tax platform like CoinLedger. 

Do I have to pay taxes on crypto if I reinvest? 

All disposals of cryptocurrency are subject to capital gains tax — regardless of whether or not you reinvest your funds in cryptocurrency.

Frequently asked questions

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