Crypto Tax Guide: What Every Investor Needs to Know

Crypto Taxes Are Real

In most jurisdictions, crypto is treated as property. Nearly every transaction can trigger tax. Tax authorities are increasingly sophisticated at tracking on-chain activity.

Taxable Events

• Selling crypto for fiat
• Trading crypto for crypto (e.g., ETH to SOL)
• Using crypto for payments
• Receiving crypto as income

NOT taxable: buying with fiat, transferring between own wallets, holding.

Short-Term vs Long-Term

Short-term (less than 1 year): Taxed as ordinary income (up to 37%).

Long-term (more than 1 year): Preferential rates (0%, 15%, or 20%). Holding 1+ year can save 15-20% in taxes.

DeFi Complications

• LP provision: adding/removing can trigger events
• Staking rewards: income when received, capital gains when sold
• Airdrops: income at fair market value when received

Tax-Loss Harvesting

Sell losing positions to offset gains. Losses offset gains dollar-for-dollar. Excess deductible up to $3K/year against income. Remaining carries forward indefinitely.

Best Practices

1. Use crypto tax software (Koinly, CoinTracker) from day one
2. Track every transaction
3. Keep records 7+ years
4. Consult crypto-savvy tax professional