Understanding Crypto Taxes in Texas: What You Need to Know
As cryptocurrency adoption grows in Texas, so does the need for clarity on tax obligations. While the Lone Star State is known for its crypto-friendly policies, the IRS still requires residents to report digital asset transactions. This guide breaks down federal and state-specific crypto tax rules, helping Texans stay compliant and avoid penalties.
How the IRS Treats Cryptocurrency
The IRS classifies crypto as property, meaning transactions trigger taxable events. Key points include:
- Capital Gains/Losses: Profits from selling crypto held over a year qualify for lower long-term capital gains rates (0%, 15%, or 20%). Short-term gains use ordinary income rates.
- Taxable Events: Selling crypto for fiat, trading coins, using crypto for purchases, and earning rewards (mining, staking, airdrops).
- Cost Basis: Calculate gains by subtracting the original purchase price plus fees from the sale price.
Texas Crypto Tax Regulations
Texas has no state income tax, but federal rules apply. Unique considerations:
- No Sales Tax on Crypto Purchases: Buying crypto with fiat or trading between coins isn’t taxed at the state level.
- Mining as Business Income: Miners must report earnings as self-employment income if conducted professionally.
- NFTs: Treated like other crypto assets—taxed upon sale or trade.
Step-by-Step Guide to Filing Crypto Taxes in Texas
- Gather Records: Compile transaction histories from exchanges, wallets, and DeFi platforms.
- Calculate Gains/Losses: Use IRS Form 8949 and Schedule D to report each transaction’s details.
- Report Income: Include mining rewards, staking yields, and airdrops as ordinary income on Schedule 1.
- File Federal Taxes: Submit forms by April 15 (or October 15 with an extension).
- State Compliance: While Texas has no income tax, businesses accepting crypto may need to remit sales tax on goods/services sold.
Common Crypto Tax Mistakes to Avoid
- Ignoring small transactions or DeFi activities
- Miscalculating cost basis due to missing data
- Failing to report crypto earned through play-to-earn games or NFTs
- Missing deadlines and facing IRS penalties (up to 25% of owed taxes)
Texas Crypto Tax FAQ
Q: Does Texas tax cryptocurrency?
A: No state income tax applies, but federal taxes on capital gains and income still exist.
Q: How do I report crypto losses?
A: Capital losses offset gains plus up to $3,000 of ordinary income annually. Use Form 8949.
Q: Are crypto exchanges like Coinbase reporting my activity?
A: Yes. The IRS requires exchanges to submit Form 1099-B for users with $20k+ in transactions and 200+ trades annually.
Q: Is mining taxable in Texas?
A: Yes. Mined crypto is taxed as income at its fair market value upon receipt.
Q: Can I deduct crypto donation
A: Yes. Donating appreciated crypto to qualified charities avoids capital gains taxes and provides a deduction.
