Key Takeaways
- The best states for crypto are Wyoming, Florida, Texas, New Hampshire, Colorado, and New Hampshire.
- The worst states for crypto are New York, California, and Hawaii.
In this guide, we’ll break down our list of the 6 best states for cryptocurrency investors and businesses.
We’ll also share 3 of the worst states for taxation and regulation.
How is cryptocurrency taxed?
On a federal level, you’re required to pay income and capital gains taxes.
Ordinary income tax: When you earn cryptocurrency, you’ll recognize income based on the fair market value of your crypto at the time of receipt. Examples of income include staking rewards, mining rewards, and airdrop rewards.
Capital gains tax: When you dispose of cryptocurrency, you’ll incur a capital gain or loss depending on how the price of your crypto has changed since you originally received it. Examples of disposals include selling your crypto, trading your crypto for other cryptocurrencies, or using crypto to make a purchase.
In addition to being subject to income taxes at the federal level, you may also be subject to income tax at the state level. Each state has its own income tax laws so the tax rate that you pay depends on the state that you live in.
For more information on how cryptocurrency is taxed, check out our guide to cryptocurrency taxes.
The best states for cryptocurrency taxes
Wyoming
In recent years, Wyoming has become a hub for crypto investors and crypto businesses.
Wyoming has exempted crypto businesses from money transmission licenses and authorized a Financial Technology Sandbox that allows businesses to test new products and technologies. Wyoming has also introduced crypto banks to serve companies in the crypto sector.
Wyoming has no state income tax.
Florida
Like Wyoming, Florida has exempted crypto businesses from money transmission licenses and created a Financial Technology Sandbox that allows crypto businesses to test new products. In addition, the state launched a pilot program that allows businesses to pay for state fees in cryptocurrency.
Florida has no state income tax.
Texas
Texas is considered one of the most crypto-friendly states in the country. In 2021, the Texas Department of Bank allowed state-chartered banks to offer cryptocurrency custody services.
In addition to cheap electricity for miners, Texas has enacted friendly policies for miners. Miners who set up shop in the state can expect 10-year tax abatements, sales, tax credits, and workforce training from the state.
Texas has no state income tax.
New Hampshire
Like Wyoming and Florida, cryptocurrency businesses in New Hampshire are exempt from the state’s money transmission regulations.
New Hampshire’s only state income tax is on interest and dividends – capital gains are not taxed.
Colorado
In 2022, Colorado’s governor, Jared Polis, announced his intention to make Colorado a center of crypto innovation. Recently, the state launched a program to allow taxpayers to pay state tax through cryptocurrency.
Unlike other states on this list, Colorado does have a state income tax, meaning income from wages as well as from cryptocurrency and other assets are subject to tax. Your income is taxed at a flat 4.40% tax rate.
Arizona
In 2022, Arizona became the first state in the union to clarify that receiving an airdrop is considered tax-free at the state level. Currently, airdrop rewards are considered taxable income at the federal level.
Arizona does have a state income tax, meaning income from wages as well as from cryptocurrency and other assets are subject to tax. Your income is taxed at a flat rate of 2.5%.
The worst states for cryptocurrency
New York
For years, New York has required crypto businesses operating in the state to register for a BitLicense. This program has been criticized for several reasons including its overreaching privacy policies and the cost involved in obtaining a license. As a result, many exchanges choose not to operate in New York.
In addition, New York has some of the highest state taxes in the country. Your income is taxed between 4 - 10.9% for New York state and if you are subject to New York City taxes, your income is taxed an additional 3.078 - 3.876%.
California
California has the highest state taxes in the country. Your income is taxed anywhere from 1 - 12.3%, depending on your tax bracket.
In 2023, California passed a crypto regulation framework that has been compared to New York’s BitLicense regime. The regulations are set to go into effect in July 2025.
Hawaii
For years, the Hawaii Division of Financial Institutions (DFI) required that companies dealing in virtual assets acquire a Money Transmitter License. One of the requirements for this license was for these companies to have fiat reserves backing the value of all digital assets. Because of these policies, many exchanges chose not to operate in the state.
In recent years, Hawaii has embraced crypto-friendly policies. In 2024, the state scrapped money transmitter license requirements for crypto exchanges.
However, Hawaii still has some of the highest state taxes in the country. Income is taxed between 1.4-11%. Capital gains are taxed at 7.25%.
Is Puerto Rico a crypto tax haven?
Some investors choose to move to Puerto Rico for tax benefits.
Because Puerto Rico is a territory of the United States and not a state, it sets its own tax policy.
Puerto Rico’s territorial income tax is lower than the federal income tax.
In addition, Puerto Rico has no capital gains tax — provided that your property was acquired and disposed of while you resided in Puerto Rico. If you originally acquired your property while residing in the United States, you’ll be required to pay federal capital gains tax.
Of course, you will need to become an official resident of Puerto Rico to receive these tax benefits. You will be required to fill out Form 8898 to change your residency and prove that you have a ‘close connection’ with Puerto Rico. The form includes the following questions.
- Where was your immediate family located during the tax year?
- Where was your principal permanent home located during the tax year?
- Where was your automobile(s) located during the tax year?
Take the stress out of tax season
Looking for an easy way to file your crypto taxes? CoinLedger can help.
With CoinLedger, you can automatically import your wallets and exchanges into the platform. More than 500,000 investors across the globe trust CoinLedger to take the stress out of tax season.
Frequently asked questions
- What states can I buy cryptocurrency in?
- Do I have to pay taxes if I have cryptocurrency?
- What states have no crypto tax?
- Where should I move to avoid crypto tax?
- Is Florida crypto-friendly?
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