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Crypto Trading Business Tax Obligations

4 min read
Crypto Trading Business

Cryptocurrency trading is a niche market that has grown significantly in the past few years. The industry is still relatively new and not even very well understood by those who have been doing it for quite some time. Because of this, many people don’t understand the tax obligations that come with crypto trading, which can be just as confusing as anything else about cryptocurrencies.

Crypto Trading Businesses Need to File Taxes

Crypto trading businesses are required to file taxes on their profits, losses, and expenses. The same rules apply to crypto trading businesses as they do for any other business. The first thing you need to know is that the IRS considers cryptocurrency as property and not currency. This means that you must report your cryptocurrency gains or losses as capital gains or losses on your tax return (Form 1040). If you’re an individual trader who trades less than $25 million in annual gross receipts during the tax year then you’ll use Schedule D instead of Form 8949 when calculating your net gain or loss from selling cryptocurrencies like Bitcoin or Ethereum (or even Altcoins). If your annual gross receipts exceed $25 million then it gets more complicated because there are special rules regarding how much time has passed between buying and selling cryptocurrencies; also known as “wash sales.”

Crypto Trading Businesses Can Deduct Expenses and Depreciation

Crypto Trading Businesses

As a crypto trading business, you can deduct your expenses and depreciation. The IRS requires that you report all income on your tax return and pay taxes accordingly. However, there are some deductions that you can use to reduce your taxable income so that it falls below the threshold at which people have to pay federal income tax. Deductions are amounts taken away from gross income in order to arrive at adjusted gross income (AGI). For example, if someone earned $50k during 2018 but incurred $20k worth of expenses during that year their AGI would be $30k ($50k – 20K = 30K). This means they won’t owe any taxes because their AGI is below $40K for single filers or $80K for married filing jointly couples who file jointly with each other, therefore only those who earn above these amounts will owe federal income tax on their earnings from last year’s activities!

Crypto Trading Businesses Should Report Crypto Gains and Losses

You are a crypto trader, and you are required to report your gains and losses from your crypto trades. The IRS has a form for this purpose: Form 8949. This form is used to report gains and losses from non-collectible trading of property (the most common property being stocks). If you have an LLC or corporation that conducts business in the US, then your business will be taxed on its net income at regular corporate tax rates. You should also consult with a lawyer about setting up an entity such as an LLC or corporation if this applies to you; they can help ensure that all legal requirements are met when setting up a company structure for crypto trading purposes

The IRS Requires Self-Employed Crypto Traders to Pay Self-Employment Tax

The IRS requires self-employed crypto traders to pay self-employment tax. Self-employment tax is a tax on net earnings from self-employment and is calculated using Schedule SE (Form 1040). It’s 15.3% of your net earnings, but you can deduct one-half of this amount as an expense on your return. You are considered self-employed if you carry on a trade or business as a sole proprietor or independent contractor (and not as an employee). You don’t have to have employees for the IRS to consider your business “self-employed.”

Obtain counsel from an accountant or tax lawyer to ensure compliance with tax law

It’s important to note that this article is not intended as legal advice. If you need assistance with your tax obligations, please seek out the help of a qualified accountant or tax lawyer.

  • Do not try to do it yourself! Tax law is complicated, and there are many nuances that may not be covered here or elsewhere on the web. Plus, there are likely thousands of different ways that crypto traders can be taxed depending on their circumstances–and each situation will require its own unique solution.
  • Don’t rely on software! Software programs like TurboTax have limited functionality when it comes to cryptocurrency taxes because they were never designed with this purpose in mind and usually don’t include any special features related specifically to crypto trades (and sometimes even basic things like reporting gains/losses). If these programs did exist then they would probably cost more than hiring someone who knows what they’re doing anyway so don’t waste time trying out anything else until after talking with an expert first.


If you are a self-employed crypto trader, it’s important that you understand your tax obligations. The IRS requires you to report all income from crypto trading on your tax return and pay any taxes due. You can deduct expenses related to this business and take depreciation deductions if needed as well. In addition, self-employment tax will need to be paid if your net earnings from self-employment exceed $400 per year. It is also recommended that you seek professional advice from an accountant or tax lawyer who understands these issues in order to ensure compliance with all laws governing this type of business operation.