How Are Crypto Credit and Debit Cards Taxed?
Crypto debit cards and crypto credit cards let you spend crypto at stores that wouldn’t usually accept crypto as a means of payment - but you might get a surprise tax bill in the process because in the vast majority of countries, spending crypto is taxable. Learn more in our guide to crypto credit and debit card tax.
How are crypto credit and debit cards taxed?
While crypto tax varies depending on where you live, in most countries, spending crypto is a taxable event, including when you spend crypto using a crypto credit card or crypto debit card. Although, it does depend on the specific you're using in some instances, so let's dive in.
Crypto debit cards tax
Unlike when you spend fiat currency like dollars - when you spend crypto, you may have to pay Capital Gains Tax.
This is because crypto is seen as a capital asset from a tax perspective. Whenever you dispose of a capital asset by spending it (or selling or trading it), you’ll pay Capital Gains Tax if you’ve made a capital gain.
A capital gain is any profit you’ve made from the asset. So if you bought crypto and the price of your asset has increased since you acquired it - you have a capital gain and you’ll need to pay Capital Gains Tax. If the price of your asset has decreased since you acquired it, you have a capital loss and you don’t need to pay Capital Gains Tax.
You don’t want to ignore losses though because you can use them to reduce your overall Capital Gains Tax bill. More on that here.
The exact amount of Capital Gains Tax you’ll pay depends on how long you’ve held your crypto and your regular income. See more on Crypto Capital Gains Tax rates and how crypto is taxed, check out our US Crypto Tax Guide.
Crypto credit cards tax
Generally, spending crypto is viewed as a disposal and therefore if you have a capital gain from the disposal it may be subject to Capital Gains Tax.
However, with cards like the Nexo Crypto Credit Card, as you’re using your crypto as collateral in return for a credit line, this isn’t the case and may actually help you increase your liquidity without creating a taxable event.
What about rewards from crypto credit cards?
When it comes to crypto rewards from credit cards, there’s very little guidance available. Generally speaking, cashback and other rewards from traditional credit cards are not treated as taxable income, so crypto rewards may not be taxable. This said, you should always check with a qualified tax professional in your location for specific advice on your potential tax liability.
How Koinly can help
Koinly can help you keep track of any tax liability relating to your crypto debit and credit card transactions. All you need to do is connect your exchange or wallet to Koinly automatically using API or by uploading a CSV file. Once you're connected, Koinly can calculate your gains and losses from selling, trading, or spending crypto, as well as the fair market value of any crypto income. Best of all, Koinly's completely free to get started with - you'll only ever pay when you want to download a tax report.
