Why Crypto Taxes Mattered in 2021
2021 saw a massive surge in cryptocurrency adoption, with Bitcoin hitting all-time highs and NFTs going mainstream. However, the IRS also intensified its focus on crypto tax compliance. New legislation, evolving guidelines, and complex transactions (like DeFi and staking) left many investors scrambling to understand their obligations. This guide answers the top crypto tax questions for 2021 and helps you file accurately.
Top Crypto Tax Questions in 2021
- Is cryptocurrency taxable? Yes. The IRS treats crypto as property, meaning sales, trades, and payments are taxable events.
- Do I pay taxes if I didn’t sell? Yes. Trading crypto for another coin, earning interest, or receiving NFTs/airdrops may trigger taxes.
- What forms do I need? Use Form 8949 and Schedule D for capital gains. Report income from mining/staking on Schedule 1.
- Are NFTs taxed? Yes. The IRS classifies NFTs as property, and sales may incur capital gains taxes.
- How are losses handled? Capital losses can offset gains or up to $3,000 of ordinary income.
Key 2021 Crypto Tax Reporting Considerations
- Track Cost Basis: Calculate gains/losses using the original purchase price plus fees.
- Report All Transactions: Include trades, DeFi swaps, and crypto earned through staking or interest.
- Use Tax Software: Tools like CoinTracker or TurboTax simplify tracking and form generation.
- Note the $600 Rule: The 2021 Infrastructure Bill proposed stricter reporting for exchanges, but taxpayers still needed to self-report all transactions.
- State Taxes: Some states (e.g., California) imposed additional crypto tax rules.
Steps to File Your 2021 Crypto Taxes
- Gather records of all transactions (buys, sells, transfers).
- Calculate gains/losses using FIFO or specific identification methods.
- Use crypto tax software to auto-generate IRS forms.
- Consult a tax professional for complex cases (e.g., mining or DeFi).
- File by the deadline (April 18, 2022, for 2021 taxes) to avoid penalties.
Frequently Asked Questions (FAQ)
Q: Are crypto-to-crypto trades taxable in 2021?
A: Yes. Swapping one coin for another is a taxable event, requiring you to report gains/losses.
Q: How do I report stolen or lost crypto?
A: You can claim a capital loss if you provide proof of theft or accidental loss.
Q: What if I didn’t report crypto in previous years?
A: File amended returns using Form 1040-X to avoid penalties.
Q: Is staking income taxable?
A: Yes. The IRS treats staking rewards as income at their fair market value when received.
Q: Do I report crypto held in foreign exchanges?
A: Yes. U.S. taxpayers must report global crypto activity, including offshore accounts.
