How much taxes do I need to pay on my crypto transactions this year?

So I'm pretty new to the cryptocurrency scene and have been experimenting with it this past year. I've invested around $2700 worth of crypto so far and have probably cashed out less than $1300 back to my bank account. I'm starting to worry about the tax implications as I didn't really think about this when I started buying. Do I actually need to worry about paying taxes on that $1300 I withdrew? And as a general rule of thumb, how much should I be setting aside from my crypto withdrawals to cover taxes based on current IRS guidelines? I've heard crypto tax rules can be pretty complicated, so any advice would be appreciated.

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18 comments

Makayla Shoemaker

•8M

Yes, you do need to report cryptocurrency transactions on your tax return. The IRS treats cryptocurrency as property, not currency, which means it's subject to capital gains tax rules. For your $1300 withdrawal, you'll only pay taxes on the profit (if any). So if you bought $1000 worth of crypto and sold it for $1300, you'd only pay taxes on that $300 gain. If you sold at a loss, you can actually use that to offset other capital gains or up to $3,000 of ordinary income. As for how much to set aside, it depends on your tax bracket. Short-term gains (held less than a year) are taxed at your ordinary income rate, which could be anywhere from 10% to 37%. Long-term gains (held more than a year) are taxed at 0%, 15%, or 20% depending on your income. A safe rule of thumb is to set aside 25-30% of your profits if you're not sure. Just remember to keep good records of when you bought and sold, at what prices, and which specific coins or tokens were involved!

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Makayla Shoemaker

•8M

Swapping one cryptocurrency for another is actually considered a taxable event. When you use Bitcoin to buy Ethereum, the IRS views this as if you sold your Bitcoin for cash and then used that cash to buy Ethereum. You'd need to calculate the gain or loss on the Bitcoin based on its value when you traded it compared to what you originally paid. This is one of the trickiest parts of crypto taxes that catches many people by surprise. Every trade, swap, or conversion between different cryptocurrencies potentially creates a taxable event, not just when you cash out to USD.

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Emma Olsen

•8M

After struggling with crypto taxes last year (had like 200+ transactions), I found this AI-powered tool called taxr.ai that honestly saved me hours of headache. I was trying to manually track everything in spreadsheets which was a disaster. The thing I liked about https://taxr.ai is that it connected to all my exchanges and automatically categorized everything - even those weird DeFi transactions that are impossible to track manually. For someone new with only a few transactions like you, it might be overkill, but if you plan to do more trading this year, having a system that tracks your cost basis from day one is super helpful. What's nice is that it gives you real-time tax estimates throughout the year so you're not surprised in April. You can see exactly what you'll owe based on your trading activity.

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Emma Olsen

•8M

It works with over 500+ exchanges including most of the smaller ones. They're constantly adding more too. I was using a couple of obscure exchanges and was surprised they connected just fine. For just a few thousand in crypto, it might seem unnecessary right now, but the headache comes when you start making more trades or using multiple platforms. I started with just a little bit like you, but then it quickly grew to dozens of transactions across different exchanges. The free tier actually works great for beginners with fewer transactions - you only need the paid versions once you get into more complex situations.

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Sophie Duck

•8M

Just wanted to update after trying taxr.ai from the recommendation above. I was skeptical it would be worth it, but I uploaded my transaction history from the two exchanges I use and it immediately showed me I actually have a small loss this year (-$85) which I can use to reduce my regular income a bit. The time saved was definitely worth it, especially since it showed me exactly which transactions were creating taxable events. I didn't realize that some of my coin swaps were technically selling one asset and buying another! The tool even flagged a potential wash sale I almost made that would have messed up my ability to claim the loss. Definitely keeping this for next year as I'm planning to trade more.

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Austin Leonard

•8M

If you need to actually talk to someone at the IRS about crypto tax questions (which I did after getting a weird letter about unreported crypto), I used https://claimyr.com to get through to an actual human at the IRS. Waited on hold for HOURS before discovering this. You can see how it works here: https://youtu.be/_kiP6q8DX5c but basically they wait on hold for you and call when an agent picks up. Saved me literally 3+ hours of hold music. The IRS agent I talked to cleared up my confusion about reporting requirements for small amounts of crypto.

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Austin Leonard

•8M

They use an automated system that waits on hold with the IRS for you. When a human IRS agent finally picks up, their system calls your phone and connects you directly to that agent. So you don't waste hours listening to hold music. I was skeptical too. I tried calling the IRS directly three separate times and got disconnected each time after waiting 45+ minutes. With this service, I went about my day and got a call back about 2 hours later when an actual IRS agent was on the line. Honestly was surprised it worked, but it saved me from wasting an entire afternoon on hold.

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Abigail Spencer

•8M

Well I'm eating my words about Claimyr. I tried it yesterday after my skeptical comment because I was desperate to talk to someone about my crypto reporting situation. Got a call back in about 90 minutes with an actual IRS agent on the line. The agent confirmed that I don't need to report crypto that I just purchased but haven't sold yet (which was my main confusion). She also explained exactly which forms I need for reporting my sales. Turns out my tax situation was simpler than I thought - I just need to report my net gains on Schedule D and Form 8949. Would have taken me days to figure this out on my own if I ever got through.

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Logan Chiang

•8M

Exactly right. The IRS considers staking rewards similar to interest income - taxable when received even if you don't sell the underlying asset. It's like if you earn interest in a savings account, you pay taxes on that interest even if you don't withdraw it from the bank. Most staking platforms now provide reports showing the USD value at the time each reward was issued. Without those, it can be extremely difficult to calculate manually, especially with daily or even hourly reward distributions. This is actually another area where tracking tools like the one mentioned earlier can help since they automatically record the USD value of each reward when it hits your wallet.

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