How to Avoid the Five Most Common Crypto Tax Mistakes I Cointelli
. The IRS classifies gaining income from generating blocks in a blockchain as earned income, which means you owe income tax on any cryptocurrency you may have mined
To determine if a crypto event is taxable, you should first understand that the IRS classifies cryptocurrency as property, not currency. Therefore, many forms of crypto-related income are classified as capital gains and are subject to capital gains or income tax.hard fork The first is the holding period, or how long a person held their crypto before selling it. Crypto gains are categorized into short-term and long-term gains and are taxed according to their holding period. Short-term capital gains can be taxed at up to 37%, while long-term capital gains can be taxed at up to 20%.
The third factor is your location. You may have to pay state and/or local taxes depending on where you live. If you are preparing to sell, make sure you understand your local tax laws before calculating your profits and losses.