Do you have to report crypto if you don’t sell?
In short, no. If you only buy crypto with USD and hold it without ever selling, you won’t have to report any capital gains or income. However, you still have to answer the “crypto question” on IRS Form 1040. If you only bought crypto and didn’t sell, you can answer “No,” given the changes made to the 2021 form.
Anytime you receive compensation in crypto, you need to report income as we stated above, and any time you sell crypto, you need to determine gain/loss on the trade and report it.
Do I pay taxes on crypto if I lose money?
You might if you traded crypto and had a profit but then traded more and had losses, you’ll still have to pay capital gains taxes on the trade where you had a profit. Let’s see an example.
You bought 1 Bitcoin at $10K. You’ll later sell that Bitcoin for $20K. Later, you buy 1 Bitcoin again at $22K, and then it drops sharply, and you sell it at $15K.
In the first trade, you had a $10K profit, leading to capital gains taxes. The tax rate will depend on your holding period. If the trade of Bitcoin at $20K happens after 12 months of holding it, you’ll have a long-term capital gains tax rate, ranging from 0% to 20%. If you hold it for less than 12 months, you’ll have a short-term capital gains tax rate, ranging from 10% to 37%.
In the second trade, you had a loss of $7K. Since you had a profit before, you can offset this loss from the $10K gains you had before. If these were the only trades you did during the tax year, the capital gains would only be $3K instead of $10K, but you still have to pay taxes even though you also had a loss.
Can you write off stolen crypto?
In the US, you won’t be able to claim a loss for stolen crypto. According to the current tax law, stolen crypto is considered a personal casualty loss, which is no longer tax-deductible. Find out more about taxes on stolen, hacked, or lost crypto.