Virtual currency (including cryptocurrency) is considered property for tax purposes (Section 4 of IRS Notice 2014-21, 2014-16 I.R.B. 938).
And all profitable transactions with property are subject to income tax. Thus, taxable transactions with virtual currency include, among other things, the following transactions:
- receiving or transferring virtual currency for free (without providing any remuneration), including through an airdrop or hard fork;
- exchanging virtual currency for goods or services;
- selling virtual currency;
- exchanging virtual currency for other property, including for another virtual currency;
- disposal of another financial interest in virtual currency (p. 17 of IRS Instructions for filing Return 1040-2020).
The income tax rate depends on the taxable amount and the status of the taxpayer (married persons filing joint returns, unmarried persons, head of the family, etc.) (Article 1, Part 1, Subsection A, Chapter 1, Tax Code 26).
