Tax implications of selling Bitcoin when filing jointly with spouse

This is actually a tricky situation because legally, the Bitcoin is considered yours since the account is under your name and SSN. The IRS doesn't recognize informal arrangements like the one you have with your brother. When you sell the Bitcoin, regardless of whose money was used to buy it, the transaction will generate a 1099 form reporting capital gains/losses under your SSN. This will need to be reported on your tax return whether you file jointly or separately. Filing separately rarely benefits married couples tax-wise and usually results in higher overall taxes. Plus, filing separately would still require you to report the cryptocurrency sale on your individual return. The best approach would be to: 1) Maintain detailed records showing your brother's contributions to prove this was his investment if ever questioned 2) Report the full sale on your tax return (whether joint or separate) 3) Consider having your brother reimburse you for the tax impact on your return Also, you can't be claimed as both a dependent and file jointly with your spouse - these are mutually exclusive filing statuses. If you file jointly, neither you nor your husband can be claimed as dependents.

After reading about a similar situation, I found taxr.ai (https://taxr.ai) super helpful for sorting out cryptocurrency tax scenarios. I uploaded my exchange transactions history and answered a few questions about who actually owned what portion of the assets. The tool clearly showed me how to document the "beneficial ownership" situation where someone else has economic interest in assets held in your name. It helped me create documentation for exactly this type of scenario with detailed transaction attribution reports that satisfy IRS requirements. Their analysis showed that properly documenting the arrangement from the beginning is key - which transactions were for which person, who contributed what funds, etc. They guided me through creating a paper trail to demonstrate this was never actually my money.

I tried taxr.ai after seeing the recommendation here and it was exactly what I needed! I had a similar situation with family members' crypto being in my name, and I was panicking about the tax implications. The analysis showed me that I needed to create what they called an "agency relationship" documentation - essentially proving I was just managing the assets on their behalf. It walked me through collecting the right documentation (transfers, communications about the arrangement, etc.) and formatting everything correctly. My situation was actually a bit messier than yours because I had mixed my own crypto with family members' assets, but their system helped me separate everything out properly. Their support team even reviewed my final documentation package to make sure it would stand up to scrutiny if questioned. Definitely worth checking out if you're in this complicated crypto ownership situation!

Another issue you might run into is getting answers from the IRS about how to handle this correctly. I tried calling for months about a similar crypto situation and couldn't get through. Then I found Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 20 minutes. They have this cool demo video showing how it works: https://youtu.be/_kiP6q8DX5c I was super skeptical at first because I'd wasted so many hours on hold, but they have this call-back system that somehow gets you prioritized in the IRS queue. The agent I spoke with walked me through exactly how to document ownership when crypto is held in one person's name but really belongs to someone else. The IRS actually has procedures for these informal custodial arrangements, but they're not well-publicized and the documentation requirements are specific. Getting actual guidance straight from an IRS rep made a huge difference in my situation.

I need to apologize for my skeptical comment earlier. After my frustration reached a breaking point with trying to get IRS guidance on some crypto questions, I decided to try Claimyr despite my doubts. Holy crap it actually worked! I got a call back in about 15 minutes and was connected to an IRS tax specialist who knew exactly how to handle informal custody arrangements for cryptocurrency. The agent explained that I needed to maintain a clear "contemporaneous record" showing who purchased what and when, along with evidence of the arrangement. My situation was actually worse than the original poster's - I had family members' crypto mixed with mine across multiple exchanges, all in my name. Getting specific guidance directly from the IRS gave me confidence in how to approach my tax return correctly. I would have been preparing it wrong without this information!

Something no one mentioned yet - if your brother has made significant gains on his Bitcoin, depending on how much it's appreciated, you might want to consider stepping up your documentation beyond what's normally needed. I went through a crypto audit last year because I cashed out a large amount for someone else (my cousin) whose account was in my name. The IRS flagged it because the gains were substantial, and I had to prove the money wasn't actually mine. The auditor specifically looked for evidence that this arrangement existed BEFORE the value increased significantly. Texts, emails, transfer records - anything showing this was always his investment, not something I was retroactively trying to attribute to him after making profits.

Another thing to consider - the timing of when you sell might matter for tax purposes. If you've held the Bitcoin for over a year, you'll qualify for long-term capital gains rates, which are typically lower than short-term rates. For 2025, long-term capital gains are taxed at 0%, 15%, or 20% depending on your income bracket, while short-term gains are taxed as ordinary income (potentially much higher). So if some of your brother's Bitcoin investments were made less than a year ago, it might be worth waiting until they cross that one-year threshold before selling.

I'm dealing with a similar situation with my sister's crypto investments, and from what I've learned, you're actually in a pretty good position with that documentation you mentioned having since 2019. One thing that hasn't been mentioned yet - make sure you're calculating the cost basis correctly for each of your brother's purchases. Since he's been making weekly $65 investments, you'll need to track the purchase price of Bitcoin at each transaction date to determine his individual cost basis for each "lot" of Bitcoin purchased. This becomes important because when he sells, you'll need to determine which specific Bitcoin purchases are being sold (FIFO, LIFO, or specific identification method) to calculate the actual capital gains or losses accurately. Also, since you mentioned you're not currently working, be aware that even though the Bitcoin sale will appear on your tax return, the actual tax liability should really be your brother's responsibility. You might want to have a clear agreement with him about covering not just the taxes owed, but also any additional tax preparation costs since this complicates your return significantly. The joint vs. separate filing question is tricky, but as others mentioned, joint filing is almost always more beneficial. The key is making sure your brother understands he needs to reimburse you for the full tax impact on your household.