Cryptocurrency that you have not “bought” is still treated as taxable income, this includes the following activities:
- Crypto payments - if you’re being paid in crypto by your employer you will be taxed according to your income tax bracket.
- Mining - Miners should establish if their activity classes them as a hobbyist or business miner - click here for guidance. Hobbyists should declare cryptocurrency received as additional income on Form 1040 Schedule 1. Business miners should report on Schedule C Profit or Loss from Business, their income is subject to 15.3% self-employment employment tax.
- Rewards - this could be from staking, masternodes, interest on crypto deposits, etc. These types of activities should be analyzed and reported for tax in the same way as mining.
- Hard forks - New coins received after a hard fork are taxable and should be treated as ordinary income equal to the fair market value of the new crypto when received. See more detailed information about hard forks.
- Airdrops - The taxable income from an airdrop would be the fair market value in USD of the airdropped coins at the time they are received.
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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.