Considering investing with crypto brokerage firm that offers earned interest on balances, which is paid out monthly in the same currency / asset of the balance (BTC earns more BTC, ETH more ETH, etc). Before I do, however, I'd like to better understand how it's taxed and should be reported the following year.
I know capital gains would only kick in if I sold or used the crypto to purchase something, etc. but, my question is outside of selling or using it, and more specifically surrounding the acquisition of the currency / asset as earned interest - would it be considered income that would be added to my AGI? Would I receive a 1099-INT comparable to a checking or savings account, etc.?
If anyone is familiar or has direct experience with this any insight would be appreciated.
Thank you.
The three of you have a track record of being knowledgeable in a number of areas. Do you have any insights into this one by chance?
Thank you.
If you get interest on crypto paid in crypto, you will have to report that in dollars at the current price.
How is reported though- as income that's added to my AGI or MAGI? or would I receive a 1099-INT like I would on a savings or checking account?
Where would this be added in TurboTax?
Thanks.
There are a number of crypto companies that pay interest on deposits of crypto.
This industry is not as regulated as the banking industry and company policies on issuing a 1099-INT most likely vary. My recommendation is to call the company that you are considering using and ask whether they issue a form 1099-INT.
Whether you receive a form 1099-INT or not, the interest earned MUST be reported so you need to make sure you can track this or get this information on documentation provided by the brokerage firm.
Keep in mind, this interest earned is not like having the investment at a bank. With crypto you could earn interest income, that needs to be reported, and the value of your investment may have declined in value. Whereas with a bank, the interest income will just add to your investment and will not decline.