Alright, can we be real for a second?
If you’re stressing about how the heck you’re supposed to report your crypto on your taxes, you’re not alone. Like, at all.
I remember last year, around March, my buddy Joe in Arizona texted me freaking out because he got this 1099 from Coinbase and had no clue what to do with it. He’d bought a bit of Bitcoin, did some swapping around with ETH, and sold some dog coins for a quick profit to pay off a credit card bill. Now he’s sweating, wondering if the IRS is going to knock on his door.
The truth? Taxes with crypto can feel confusing, but it doesn’t have to be a nightmare. Let’s break it down like we’re grabbing coffee, not like some stiff accountant lecture.
First Off, Yep, You Gotta Report It
Let’s get this out of the way: The IRS knows about your crypto.
A lot of folks think, “Oh, it’s decentralized, so they won’t find out.” Nah. Exchanges like Coinbase, Kraken, Gemini—they report to the IRS. Even if you didn’t get a tax form, you’re still responsible.
Te lo digo por experiencia: Ignoring it will only give you a headache later.
If you made a profit, that’s a capital gain. If you sold for a loss, you can use that loss to offset gains and even lower your taxable income up to $3,000 per year if you’re in the U.S.
So What Counts as a Taxable Event?
Ojo con esto. Not everything you do in crypto triggers taxes, but a lot does:
✅ Selling crypto for USD
✅ Swapping one crypto for another (like ETH to SOL)
✅ Using crypto to buy goods or services
✅ Getting paid in crypto
But just buying and holding? No tax until you sell.
Example: My cousin Alicia in Chicago bought $1,000 of ETH in 2022, and it’s just sitting in her wallet. She owes nothing yet. But if she sells it this year for $1,500, she’ll have a $500 capital gain to report.
Long-Term vs Short-Term Gains (Yes, It Matters)
If you hold crypto for less than a year before selling, you pay short-term capital gains tax, which is taxed at your regular income rate (could be 22%, 24%, etc., depending on your bracket).
If you hold more than a year, you pay long-term capital gains, which is usually lower (0%, 15%, or 20%, depending on your income).
So yeah, sometimes just holding can save you money on taxes.
Keeping Track Without Losing Your Sanity
This is the part that messes people up, and honestly, I get it. You buy a little here, swap there, use some for gas fees, stake some on Coinbase, it’s a mess.
Best move? Use a crypto tax app.
Here are a few solid ones:
- CoinTracker (syncs with Coinbase, Kraken, etc.)
- Koinly (user-friendly, spits out tax forms)
- TokenTax (good if you trade a lot)
They’ll track your transactions and calculate your gains, losses, and what you owe. Trust me, it’s worth it, unless you want to be sitting with a spreadsheet at 2 am on April 14th questioning your life choices.
What About Crypto Earned as Income?
If you’re getting paid in crypto, or earning staking rewards, or mining, that’s considered income at the fair market value when you receive it.
Example: You earn $100 worth of ETH from a freelance gig. That’s income you’ll report, and you’ll pay income tax on it.
Later, when you sell that ETH, you’ll also calculate a capital gain or loss based on how much it went up or down from when you received it. Yep, it’s double tracking, but that’s the system.
Losses Can Actually Help You
If you had a rough year and sold crypto at a loss, don’t ignore it.
You can use losses to offset your gains, and if your losses are bigger than your gains, you can deduct up to $3,000 per year against your regular income, rolling over the rest to future years.
Like my friend Rob in Florida, who lost $2,500 on some altcoins but made $1,000 on Bitcoin. He was able to use the loss to cancel out his gain and still deduct $1,500 against his regular income. It took the sting out of a bad trade.
Get Professional Help If You Need It
I’m not going to lie to you, if you’ve done a lot of crypto trades, DeFi, NFTs, staking, airdrops, etc., your taxes might get complicated.
No shame in hiring a CPA who understands crypto. A lot of regular tax preparers don’t get how crypto works, so check if they’ve worked with it before. It could save you from mistakes or missed deductions.
Take It One Step at a Time
✅ Collect your transaction history.
✅ Use a tax app or talk to a CPA.
✅ File honestly to avoid future headaches.
✅ Plan next year’s crypto moves with taxes in mind (holding for long-term, using losses, etc.).
Final Thoughts: You’ve Got This
Listen, I get it. Crypto taxes can feel scary, but it’s just another piece of managing your money like a grown-up.
Don’t let the fear of taxes keep you from learning or investing responsibly in crypto. Take it slow, stay organized, and remember, you don’t have to have it all figured out overnight.
The truth? The IRS isn’t out to get you if you’re doing your best to report accurately. And you’ll feel way better once you file correctly and don’t have that stress hanging over your head.
You’re not behind. You’re not dumb for feeling overwhelmed. You’re learning, you’re growing, and you’re taking care of your financial future.
And hey, if you need someone to explain staking vs. mining or how airdrops get taxed without using boring jargon, hit me up. We’re all figuring this out together.