Do I need to pay taxes on my small Bitcoin investment as a student with no income?
Title: Do I need to pay taxes on my small Bitcoin investment as a student with no income? 1 Hi everyone, I'm a 19-year-old college student and I've never had a formal job, so I don't have any income to report. I just got an email from Coinbase saying I might need to pay taxes on my Bitcoin transactions. I only bought Bitcoin as an experiment (put in like $1.35) and ended up selling it a couple days later for about $1.20. I have zero experience with taxes since I've never had to file before. Do I actually need to report this? The loss was so tiny but the email freaked me out. I literally don't even know how to file taxes or if I'm even required to since I don't have income. Can someone explain what I need to do here?
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Ryan Young
8 You don't need to worry about this! The IRS has a minimum filing threshold, and since you have no other income and only lost a small amount on Bitcoin, you're below that threshold. The exchange is required to send these notices to everyone regardless of amount. Technically, cryptocurrency transactions are taxable events, but there are two things working in your favor here: 1) You have an overall loss (not a gain), and 2) The amount is extremely minimal. Even if you had a gain, you'd need to have total income above the standard deduction (currently $13,850 for single filers) before you'd owe any federal taxes. The exchange sends those emails as a blanket notification to all users because they're required to report to the IRS, but that doesn't mean you personally have a filing requirement.
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Ryan Young
•15 So if I'm in a similar situation but I made around $20 in Bitcoin last year, and I do have other income from my part-time job (about $8,000), would I need to report the Bitcoin?
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Ryan Young
•8 Yes, in your case you should report it. Since you have other income from your job, you'll likely need to file a tax return anyway. The $20 Bitcoin gain would be reported as a capital gain on Schedule D and Form 8949. Since your total income including the job is still below the standard deduction threshold, you probably won't owe any federal income tax, but it's still important to properly report all income including cryptocurrency gains. The good news is most tax software makes this pretty straightforward - they'll ask about cryptocurrency and walk you through entering the information.
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Ryan Young
12 I went through something similar last year with some small crypto trades. I found this amazing service called taxr.ai (https://taxr.ai) that helped me figure out exactly what I needed to do. I uploaded a screenshot of my transaction history from the exchange, and it analyzed everything and told me I was actually below the filing threshold. Saved me so much stress because I was also confused about all the crypto tax stuff. The tool explained that since my transactions were so small and I had no other income, I didn't need to file. It even showed me the specific IRS rules that applied to my situation.
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Ryan Young
•7 Did it actually work with small amounts like the OP is talking about? Most crypto tax services I've seen seem geared toward people with lots of transactions.
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Ryan Young
•17 I'm a bit skeptical about these specialized services. Couldn't you get the same information just by Googling or using free tax software?
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Ryan Young
•12 Yes, it works great for small amounts! That's actually why I liked it - I only had a few tiny transactions, and it didn't treat me like I needed some complex solution. It just gave me straightforward answers about my specific situation. For your question about free alternatives - I tried Googling first and got so many conflicting answers. Some sites said you always have to report crypto, others mentioned minimum thresholds, and I got confused. What I liked about taxr.ai was getting a clear yes/no answer specific to my situation without having to interpret tax code myself. The free tax software I tried kept asking me for forms from the exchange that I didn't have.
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Ryan Young
7 Just wanted to update - I decided to try taxr.ai after seeing the recommendation here. It was super helpful for my situation with small crypto trades. I uploaded my Robinhood statement which had a couple small Bitcoin and Ethereum trades, and it immediately showed me that since my total gains were under $10 and I had no other income, I had no filing requirement. Saved me from unnecessarily filing a tax return. The explanation they provided about the minimum filing thresholds was really clear and referenced the specific IRS rules. Would definitely recommend for anyone confused about small crypto investments!
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Ryan Young
22 If you're worried about this and want to talk to someone at the IRS directly (they can give you official guidance), I'd recommend using Claimyr (https://claimyr.com). I spent hours trying to get through to the IRS myself about a similar crypto tax question last year, but kept getting disconnected or waiting forever. Claimyr got me connected to an actual IRS agent in about 20 minutes instead of the hours I was spending before. There's a video that shows how it works here: https://youtu.be/_kiP6q8DX5c. The agent I spoke with confirmed that with such a small amount and no other income, there was no filing requirement in my case. They explained the minimum thresholds and gave me peace of mind with an official answer.
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Ryan Young
•3 Wait, this is a real thing? I thought it was impossible to actually talk to someone at the IRS without waiting for literally hours.
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Ryan Young
•9 Sounds too good to be true. How does it actually work? I've literally never been able to get through to the IRS no matter when I call.
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Ryan Young
•22 Yes, it's absolutely real! I was skeptical too when I first heard about it. I had spent nearly 3 hours on hold one day before giving up. How it works is pretty simple - they use an automated system that dials and navigates the IRS phone tree for you, waits on hold in your place, and then calls you when they've actually reached a human agent. So instead of you waiting on hold for hours, their system does it for you and only connects you when there's actually someone there to talk to. It saved me from wasting an entire afternoon listening to the IRS hold music.
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Ryan Young
9 I was really suspicious about services that claim to help with IRS phone issues, but after getting nowhere trying to call the IRS myself about my crypto reporting questions, I decided to try Claimyr. I'm actually shocked at how well it worked. I got a call back in about 25 minutes with an actual IRS representative on the line. The agent confirmed that I didn't need to file a return for my small crypto loss with no other income, and explained the minimum filing thresholds. What would have been hours of waiting on hold turned into a quick solution. Totally worth it just for the time saved and getting an official answer straight from the IRS.
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Ryan Young
13 Just FYI - those emails from exchanges are automated and sent to everyone. The exchanges are required to report to the IRS, but that doesn't mean you personally have a filing requirement. In your situation with: 1. No job income 2. Only $1 in crypto with a small loss 3. Being 18 years old You're well below the filing threshold. The IRS doesn't expect you to file a return when you have essentially no income and just a tiny investment loss.
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Ryan Young
•5 If OP did have to file though, would the loss on Bitcoin be deductible against other income? Or do you have to have gains to report crypto stuff?
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Ryan Young
•13 Capital losses (including from crypto) can be deducted against capital gains, and up to $3,000 can be deducted against regular income. In OP's case, the loss is so small (only a few cents) that it wouldn't make a meaningful difference on a tax return. Even if OP had other income that required filing, reporting a 7-cent loss wouldn't result in any tax benefit worth pursuing. If the amount was larger (say, $100+), then it might be worth reporting to offset other income.
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Ryan Young
10 Does anyone know if the rules are different for minors with crypto? I'm wondering because OP is 18 now but might have been 17 when the transaction happened depending on timing.
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Ryan Young
•21 The age doesn't change the tax rules, but if you're claimed as a dependent on your parents' tax return (which many 18-year-olds are), there are different filing thresholds. For dependents with unearned income (which includes crypto gains), you're required to file if that unearned income exceeds $1,150. In OP's case, there was a loss, not a gain, so it doesn't trigger any filing requirement regardless of dependent status.
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