The United States of America is one of the countries with properly laid out tax regimes for cryptocurrency, entailing the nature of transactions and categorisation of these assets. Recently, Biden announced a set of reforms regarding crypto taxation in the United States.
A large proportion of US population owns crypto, amounting to a rough 50 million or one-fifth of the population.
Do you have to pay crypto tax in the United States?
Yes, in the United States crypto is either taxed as capital gains or as income, depending upon the type of transaction and the duration for which you have held the asset.
When do you have to pay tax on crypto in the United States?
Transactions like selling crypto, spending it to pay for goods and services, swapping it or getting paid in crypto are subject to taxes in the United States.
What crypto transactions are taxable in the United States?
As capital gains, selling crypto, using it for payments and swapping it is taxable.
As income, getting paid in crypto and getting crypto in exchange for goods or services is taxable.
What are the Crypto Tax Rates in the United States?
AS CAPITAL GAINS
| Single taxpayers | Married filing jointly | Head of household | Married filing separately | Long-term capital gains rate (%) |
| Up to 41,675 | Up to 83,350 | Up to 55,800 | Up to 41,675 | 0 |
| 41,676 to 459,759 | 83,351 to 517,200 | 55,801 to 488,500 | 41,676 to 258,600 | 15 |
| Over 459,750 | Over 517,200 | Over 488,500 | Over 258,600 | 20 |
AS INCOME
| Single Taxpayers Taxable income (USD) | Married Taxpayers | Head of Household Taxpayers | Married Taxpayers (filing separately) | Tax rate (%) |
| 0 to 10,275 | 0 to 20,550 | 0 to 14,650 | 0 to 10,275 | 10 |
| 10,276 to 41,775 | 20,551 to 83,550 | 14,651 to 55,900 | 10,276 to 41,775 | 12 |
| 41,776 to 89,075 | 83,551 to 178,150 | 55,901 to 89,050 | 41,776 to 89,075 | 22 |
| 89,076 to 170,050 | 178,151 to 340,100 | 89,051 to 170,050 | 89,076 to 170,050 | 24 |
| 170,051 to 215,950 | 340,101 to 431,900 | 170,051 to 215,950 | 170,051 to 215,950 | 32 |
| 215,951 to 539,900 | 431,901 to 647,850 | 215,951 to 539,900 | 215,951 to 323,925 | 35 |
| 539,901+ | 647,851+ | 539,901+ | 323,926+ | 37 |
United States Income Tax Brackets (2023)
| Single Taxpayers Taxable income (USD) | Married Taxpayers | Head of Household Taxpayers | Married Taxpayers (filing separately) | Tax rate (%) |
| 0 to 10,275 | 0 to 20,550 | 0 to 14,650 | 0 to 10,275 | 10 |
| 10,276 to 41,775 | 20,551 to 83,550 | 14,651 to 55,900 | 10,276 to 41,775 | 12 |
| 41,776 to 89,075 | 83,551 to 178,150 | 55,901 to 89,050 | 41,776 to 89,075 | 22 |
| 89,076 to 170,050 | 178,151 to 340,100 | 89,051 to 170,050 | 89,076 to 170,050 | 24 |
| 170,051 to 215,950 | 340,101 to 431,900 | 170,051 to 215,950 | 170,051 to 215,950 | 32 |
| 215,951 to 539,900 | 431,901 to 647,850 | 215,951 to 539,900 | 215,951 to 323,925 | 35 |
| 539,901+ | 647,851+ | 539,901+ | 323,926+ | 37 |
United States Short Term Capital Gain Tax Rates (2023)
| Single filers | Married couples filing jointly | Head of household | Tax Rate |
| Up to $11,000 | Up to $22,000 | Up to $15,700 | 10% |
| $11,001– $44,725 | $22,001– $89,450 | $15,701– $59,850 | 12% |
| $44,726– $95,375 | $89,451– $190,750 | $59,851– $95,350 | 22% |
| $95,376– $182,100 | $190,751– $364,200 | $95,351– $182,100 | 24% |
| $182,101– $231,250 | $364,201– $462,500 | $182,101– $231,250 | 32% |
| $231,251– $578,125 | $462,501– $693,750 | $231,251– $578,100 | 35% |
| $578,125+ | $693,750+ | $578,100+ | 37% |
United States Long Term Capital Gain Tax Rates (2023)
| Single taxpayers | Married filing jointly | Head of household | Married filing separately | Long-term capital gains rate (%) |
| Up to 41,675 | Up to 83,350 | Up to 55,800 | Up to 41,675 | 0 |
| 41,676 to 459,759 | 83,351 to 517,200 | 55,801 to 488,500 | 41,676 to 258,600 | 15 |
| Over 459,750 | Over 517,200 | Over 488,500 | Over 258,600 | 20 |
How is Tax Calculated on Cryptocurrency in the United States?
Crypto tax in the United States can be levied based upon two categories: capital gains tax and income tax.
Crypto is taxed as income tax whenever you are getting paid in crypto or staking crypto.
Capital Gain tax rates are levied when you sell crypto, trade crypto or you spend in crypto. If you have held the assets for less than a year before disposing of them, short term capital gains are levied. Otherwise, if these assets were held for longer than an year and then disposed of, long term capital gain tax rates are levied.
Now, in order to determine the values of your capital gain, you need to calculate the values at which you acquired the asset and at the value you sold it. There are two ways to go about this: First in First out (FIFO) and Average Costs Based (ACB).
According to FIFO Method, you sell your oldest acquired coin first and cost is calculated according to the respective prices at which the coin was bought. Whereas, in ACB, time of buying doesnt matter and average cost is taken into account.
Let’s take an example,
Say you bought 2 BTC for $20,000 in 2020 and 4 BTC for $60,000 in 2021. Then you sold 4 BTC in 2022 for $100,000:
- FIFO METHOD
You sell 2 BTC from 2020 and 2 BTC from 2021. So cost price is:
= 20,000 + (2/4)*60,000
= $50,000
Profit = 1,00,000 – 50,000
= $50,000
Here, taxes are levied on $50,000 .
- ACB METHOD:
All coins are of the same denomination. Therefore, cost price for one coin:
= (20,000 + 60,000)/6
= $13,333
So, cost price of 4 coins:
= $53,333
Profit = 1,00,000 – 53,333
= $46,666
Here, taxes are levied on $46,666.
Is there any Crypto Tax Free in the United States?
Buying, holding and transferring crypto from one wallet to another is not taxable in the United States.
Crypto Tax in United States – FAQs
Do you have to pay tax when you buy crypto in the United States?
No, you do not have to pay taxes when buying crypto in the US.
Do you have to pay tax when you sell crypto in the United States?
Yes, selling crypto is subject to capital gains tax.
Do you have to pay tax when transferring crypto in the United States?
No, transferring crypto is not taxable in the United States.
Do you have to pay tax when spending crypto in the United States?
Yes, spending crypto is subject to capital gains tax.
Is swapping crypto taxable?
Yes, swapping one crypto coin for another is taxable in the United States.
How much tax on crypto gains in the US?
Single taxpayers Married filing jointly Head of household Married filing separately Long-term capital gains rate (%) Up to 41,675 Up to 83,350 Up to 55,800 Up to 41,675 0 41,676 to 459,759 83,351 to 517,200 55,801 to 488,500 41,676 to 258,600 15 Over 459,750 Over 517,200 Over 488,500 Over 258,600 20
How do I avoid capital gains tax on crypto in the US?
Keeping crypto long term will lower the amount of taxes you pay. Also if you income is less than $41675, then you are exempt from long term capital gains tax.
Market Research Intern, Octaloop
Maitreyee takes a keen interest in financial technologies and their potential to transform lives at the grassroots. Put together with her penchant for Economic Research, she brings tonnes of academic and actionable insight into our products. Maitreyee is contributing at Binamite as a Market Research Intern, and when she's not doing that, you can find her exploring the city or buried in a book.