Do you pay taxes on crypto in the USA?

You’re required to pay taxes on crypto. The IRS classifies Cryptocurrency as property, and cryptocurrency transactions are taxable by law just like transactions related to any other property.

Taxes are due when you sell, trade, or dispose of cryptocurrency in any way and recognize a gain. For example, if you buy $1,000 of crypto and sell it later for $1,500, you would need to report and pay taxes on the profit of $500. If you dispose of cryptocurrency and recognize a loss, you can deduct that on your taxes.

Buying crypto on its own isn’t a taxable event. You can buy and hold cryptocurrency without any taxes, even if the value increases. There needs to be a taxable event first such as selling the cryptocurrency.

The IRS has been taking steps to ensure that crypto investors pay their taxes. Tax filers must answer a question on Form 1040 asking if they had any type of transaction related to a virtual currency during the year. Crypto exchanges are required to file a 1099-K for clients who have more than 200 transactions and more than $20,000 in trading during the year.