US Bitcoin & Crypto Tax Rate: How Much Will You Pay?
Need to know your crypto tax rate ahead of the April 18 deadline? We've got you. Read our crypto tax rates 2023 guide, covering everything you need to know about Capital Gains Tax rates, Federal Income Tax Rates, and State Income Tax rates in the US - from California to NYC! ✈️
How much tax do you pay on crypto?
When it comes to crypto, there are a few tax rates you need to know about - your Federal & State Income Tax rates and your Capital Gains Tax rate. Your Income Tax rate will be a combination of the Federal Tax rate and your State Tax rate (if you have one - a couple of states don't). Meanwhile, your Capital Gains Tax rate will be either 10% or 20% depending on your total annual income - including crypto investments. The tax you'll pay depends on the investments you're making and how long you've held your asset.
You can learn everything you need to know about crypto tax in the US in our Ultimate US Crypto Tax Guide, but in brief:
- You'll pay Federal & State Income Tax on crypto short-term capital gains when you've sold, swapped, or spent crypto you've held less than a year.
- You'll pay Federal & State Income Tax upon receipt of crypto income - like mined coins, staking rewards, airdrops, and even coins from a hard fork.
- You'll pay Capital Gains Tax on crypto long-term capital gains when you've sold, swapped, or spent crypto you've held for more than a year. For NFTs deemed collectibles, you may pay the higher 28% collectibles long-term Capital Gains Tax rate.
Now you understand the basics, let's take a look at the different crypto tax rates and how much you'll pay.
Want to learn more about crypto tax in the US? Read our Ultimate Crypto Tax Guide.
How much is Capital Gains Tax on crypto?
Wondering what tax rate you'll pay on crypto gains? As we said above, it all depends on how long you've held your asset. If you've held your asset for less than a year, you'll pay your Federal & State Income Tax rate on short-term crypto gains, while if you've held your crypto for more than a year, you'll pay the long-term Capital Gains Tax rate on crypto gains, which is much lower. It's important to note though that for NFTs deemed collectibles under the latest guidance you may pay the higher 28% long-term Capital Gains Tax rate.
Long-Term Crypto Capital Gains Tax rate 2022
For 2022, the long-term crypto gains tax rates are:
Long-Term Crypto Capital Gains Tax rate 2023
Planning ahead? For 2023, the long-term crypto gains tax rates (for taxes due in April 2024) are:
Update 2023
As part of the 2023 Federal Budget, President Biden has proposed several tax reforms that may impact crypto investors, one of which is a change to long-term Capital Gains Tax rates for wealthy investors. Under the current budget proposal, Capital Gains Tax rates would increase from 20% to 39.6% for investors earning more than $1 million each year. As well as this, crypto would finally be included in the wash sale rule along with stocks, meaning investors could no longer tax loss harvest as aggressively. But the budget still needs to go through the approval process. We'll update this article as it progresses.
Capital Gains Tax breaks
If you earned less than $41,675 in 2022 in total income (including your crypto gains) you'll pay no Capital Gains Tax on long-term gains.
How much is Income Tax on crypto?
You'll pay your Federal Income Tax rate (and any applicable state taxes - more on this shortly) on crypto short-term capital gains - so any gains from selling, swapping, or spending crypto you've held less than a year. You'll also pay the same rate on any crypto income, for example, mining rewards, staking rewards, airdrops, and hard forks.
Short-Term Capital Gains Tax & Income Tax 2022
The Federal Income Tax rates for 2022 are:
Short-Term Capital Gains Tax & Income Tax 2023
Looking ahead to the next financial year? The Federal Income Tax rates for 2023 are:
State tax rates on crypto
If you're paying Income Tax on crypto - both federal taxes and state taxes may apply. It's worth noting however that the majority of states are yet to issue guidance on the taxation of cryptocurrency at a state level and as such, you should consult with a crypto accountant to clarify your state tax liability.
This said, generally states follow the federal tax treatment of crypto, which means that crypto is most likely considered a property at a state level, and general tax principles applicable to property transactions will apply to transactions involving cryptocurrency.
In other words, this means when you have short-term crypto gains or crypto income, State Income Tax may apply.
State taxes work slightly differently depending on the state you live in. In some states, you'll pay a marginal personal tax rate that increases with how much you earn, like the federal Income Tax rate. Meanwhile, in other states, you'll pay a flat Income Tax rate and in some states, you'll pay no tax at all.
We won't cover all 50 states in this guide or you'll be reading all day - but we'll cover the basics and the most popular states for crypto investors.
Which states have issued guidance on crypto tax?
A limited number of states have issued guidance on the tax implications of cryptocurrency transactions, mostly surrounding the potential application of sales tax as opposed to Income Tax. States that have issued guidance so far include:
- California: California treats cryptocurrencies as cash equivalents and taxes purchases with crypto the same way as purchases with fiat currency.
- Kansas: Kansas treats cryptocurrencies as cash equivalents. Sellers accepting crypto as payment must convert crypto payments into the USD equivalent and charge Kansas sales and use tax.
- Kentucky: Kentucky treats crypto as a cash equivalent. Sellers accepting crypto as payment must convert crypto payments into the USD equivalent and charge Kentucky sales and use tax.
- Michigan: The Michigan Department of Treasury states Michigan does not view cryptocurrencies as tangible personal property and therefore does not impose a sales and use tax on purchases of crypto.
- New Jersey: New Jersey treats cryptocurrencies as cash equivalents and taxes purchases with crypto the same as purchases made with fiat currency.
- New York: New York treats cryptocurrencies as cash equivalents and taxes purchases with crypto the same as purchases with fiat currency.
- Pennsylvania: Pennsylvania has limited guidance, but states NFTs may be subject to sales tax unless there is an applicable exemption.
- Washington: Washington does not tax the purchase of cryptocurrency, but treats purchases made with cryptocurrency the same as if made with crypto. Washington also has extensive guidance on the tax implications of NFTs and states sales tax may apply in many instances.
- Wisconsin: Wisconsin states crypto represents an intangible right rather than personal property and the sales price of crypto itself is therefore non-taxable.
Texas crypto taxes
As well as being a crypto mining hub, Texas is looking particularly favorable for crypto investors. Not only are Bitcoin bulls, El Salvador, looking at launching a Bitcoin embassy in Texas - but a new bill before the Texas legislature proposes to make spending on goods and services Bitcoin tax free in Texas.
States with no State Income Tax
There are eight states with no Individual State Income Tax rate. These are:
- Alaska
- Florida
- Nevada
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Of course it's not all good news, many of these states impose higher levies on other taxes. Regarding crypto in particular, Washington was the first US state to bring NFTs into its sales tax regime, and now sellers and retailers must charge a 6.5% state tax for NFTs.
Flat State Income Tax on crypto
There are 10 states with a flat Income Tax rate. These are:
Important: It's well worth checking what counts as income in your state. For example, in New Hampshire, regular income is not subject to state tax, only to dividends and interest income.
With the simple stuff out the way, let's check out the most popular crypto states and their state tax rates on crypto.
California State Income Tax Rates
Want to know the California State Income Tax rates on crypto?
Connecticut State Income Tax rates
New York State Income Tax Rates
Important: In addition to the above, New York State also levies a supplemental tax on folks who have an adjusted gross income over $107,650. As well as this, New York City residents and so-called Yonkers have their own local income tax on top of the state tax. These rates are 3.078%, 3.762%, 3.819% and 3.876% respectively depending on your income.
When to file crypto taxes
Most taxpayers need to file their taxes as part of your annual tax return by the 15th of April 2023. As this falls on a weekend and there is the District of Columbia's Emancipation Day holiday on the Monday, this has been extended to the Tuesday 18th April 2023. You can find out more about how to file in our how to file IRS crypto taxes guide.
US Tax Deadlines 2022 - 2023
The US tax year runs from the 1st of January to the 31st of December 2022. There are several important dates you need to know about:
- 1st January 2022: 2022 tax year starts.
- April 18th 2022: Deadline for 2021 tax return for both income and capital gains. This is usually the 15th of April but has been extended due to it falling close to a weekend.
- 15th June 2022: Deadline for 2021 tax returns for US citizens living abroad.
- October 15th 2022: Deadline for 2021 tax returns for taxpayers who received an extension.
- 31st December 2022: 2022 tax year ends.
- 1st January 2023: 2023 tax year starts.
- April 18th 2023: Deadline for the 2022 tax return confirmed by the IRS.
- 15th June 2023: Deadline for 2021 tax returns for US citizens living abroad.
- October 16th 2023: Deadline for 2022 tax returns for taxpayers who received an extension.
- 31st December 2023: 2023 tax year ends.
How to file crypto taxes with Koinly
You need to keep a record of all your crypto transactions, including how much you bought assets for and how much you sold assets for, as well as receipts for all these transactions.
For crypto investors who trade at volume, this in itself is a lot of work. Let alone then identifying and calculating the different types of taxes for each transaction. This is why using crypto tax software like Koinly is a much easier option when it comes to crypto taxes.
Once you have a record of your crypto transactions and you've calculated your taxes correctly, there's several forms you'll need to file your annual taxes with the IRS:
- Form Schedule D: This form reports your total capital gains and losses, including from crypto investments.
- Form 8949: This form is added to Schedule D. It logs the details of your crypto transactions in relation to capital gains and losses. This includes the FMV the day you bought it, the FMV the day you sold and the subsequent profit or loss of each transaction.
- Form Schedule 1: Any crypto taxed as income belongs on this form - on line 8 specifically. If you're a self-employed taxpayer, use Schedule C instead.
Once you've filled out the forms you need to, or used crypto tax software to generate them automatically, file them using an online tax service like Free File or Turbo Tax before the tax deadline.
We have loads more helpful tax tips for American crypto investors in our US Crypto Tax Guide.
FAQs
More questions? We got you.
What's the Bitcoin tax rate?
Like with other cryptocurrencies, the tax rate you'll pay on Bitcoin all depends on whether you have capital gains or income, how much you earn and how long you've held your asset.
How much tax on Bitcoin profit?
You'll pay 0% to 20% tax on long-term Bitcoin capital gains and 10% to 37% tax on short-term Bitcoin capital gains and income, depending on how much you earn.
What's my crypto tax bracket?
To identify your crypto tax bracket, you need to figure out your total annual income for the year - including your ordinary income, misc. income and capital gains.
What is the tax rate for cryptocurrency?
It depends on your specific circumstances, but you'll pay anywhere between 10 - 37% tax on short-term gains and income from crypto, or 0% to 20% in tax on long-term gains from crypto.
What is the tax on crypto earnings?
Income from crypto is taxed the same as your regular income, so you'll pay between 10% to 37% in tax depending on how much your total annual income is - including from crypto.
