Disclaimer: This article is intended as an informative piece. This is not accounting or tax advice. Please speak to a qualified tax professional about your specific circumstances before acting upon any of the information in this article.
There is no minimum profit you need to have made: no general federal "crypto profit allowance" exists below which taxable crypto gains can be ignored. Income, gains and losses from taxable digital-asset transactions must be reported regardless of amount. However, making a profit does not automatically mean tax is payable: the result depends on your overall tax return, including whether the gain is short-term or long-term, your taxable income, other capital gains and losses, deductions and credits. Some long-term capital gains even fall within the 0% federal rate band.
Buying crypto with US dollars, holding it, or moving it between wallets you own is generally not a taxable disposal, although anyone filing a federal return must still answer the return's digital-asset question. The size of the gain on each disposal also depends on the cost basis method used (such as FIFO or specific identification).
Recap uses your imported transaction history and your chosen tax settings to calculate the gains, losses and income that go into your tax report; your wider tax liability depends on the rest of your return. Additionally, if you lost money overall from your cryptocurrency transactions in a tax year, up to $3,000 of the net loss ($1,500 if married filing separately) may be claimable against ordinary income, with the rest carrying forward to future years.
Click the button below to connect your crypto accounts and find out where you stand with the IRS.
Need to sort out your crypto taxes? Use Recap, the privacy focused cryptocurrency accounting software to calculate the taxable gain or loss on your cryptocurrency investments!