How to Report Cryptocurrency Income for 2017 Taxes
If you were one of the many individuals that made money from investing in cryptocurrency this year, then you will owe taxes on your gains. Any gain or loss from the sale or exchange of the asset is taxed as a capital gain or loss. Crypto traders already have records of most of those transactions, either on the blockchain or from your wallet provider, but those trades need to be converted to dollars at the time of the transaction for income tax reporting purposes.
Some exchanges, like Coinbase, will send some users a 1099-K if they have received at least $20,000 cash for sales of cryptocurrency related to at least 200 transactions during the calendar year. Any profits made from the sales needs to be reported on Schedule D of form 1040.
The length of time an individual held cryptocurrency before selling will also impact their reporting. If you’ve held the cryptocurrency less than a year before selling it, it will be taxed as a short-term capital gain, which is still taxed at the same rate as ordinary income. But if you’ve held the cryptocurrency longer than a year before using it, it is taxed as a long-term capital gain at lower rates. Additionally, If you’re in the top three highest income brackets, you will also have to pay a 3.8 percent tax on net investment income.