For tax purposes, crypto is either considered earned income or treated as property sales.
It’s treated as a property sale (with capital gains or losses) when you:
- Sell it (like you would stock)
- Exchange it (swap one type of crypto for another)
- Spend it (use it as payment for goods and services)
- Convert it to US dollars (sell crypto to buy regular currency)
If someone pays you in crypto and then you sell it for a profit, you'll pay taxes on the income and pay the capital gains tax.
The gain is calculated like selling a stock; the difference between your Cost Basis and the Sales Price, and whether it was long-term or short-term.
Here's more info on How to Report Crypto as Capital Gain and How Capital Gains are Taxed.
Be sure to check out our new Crypto Investor Center.
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