How Arizona Treats Cryptocurrency for Tax Purposes
Arizona follows federal IRS guidelines, classifying cryptocurrency as property rather than currency. This means every transaction (e.g., selling, trading, or spending crypto) may trigger a taxable event. While Arizona doesn’t impose additional state-specific crypto taxes, residents must report gains/losses on both federal and state returns. Notably, Arizona applies sales tax to crypto purchases of tangible goods, treating it like traditional payment methods.
Arizona Crypto Tax Reporting Requirements
You must report the following crypto activities in Arizona:
- Selling crypto for fiat (e.g., converting Bitcoin to USD)
- Trading crypto-to-crypto (e.g., swapping Ethereum for Solana)
- Using crypto for purchases (e.g., buying a laptop with Dogecoin)
- Earning crypto via mining, staking, or rewards
Report federal gains using IRS Form 8949 and Schedule D, then transfer totals to Arizona Form 140.
Arizona Crypto Tax Rates & Deductions
- Short-term gains (assets held ≤1 year): Taxed at ordinary income rates (2.55%–4.50% in 2023).
- Long-term gains (held >1 year): Taxed at 4.50% (Arizona’s flat rate).
Deductible expenses include:
- Capital losses (up to $3,000 annually)
- Transaction fees
- Charitable crypto donations
How to File Crypto Taxes in Arizona: 4 Steps
- Track Transactions: Use tools like Koinly or CoinTracker to log buys, sells, and trades.
- Calculate Gains/Losses: Determine cost basis and fair market value for each transaction.
- File Federal Taxes: Report totals on IRS Form 8949 and Schedule D.
- File Arizona Taxes: Transfer amounts to Form 140, Line 16 (capital gains).
Common Crypto Tax Mistakes to Avoid
- ❌ Ignoring small transactions (all activity must be reported)
- ❌ Misclassifying long-term vs. short-term holdings
- ❌ Forgetting to include staking/mining income
- ❌ Missing the April 18, 2024, deadline
FAQs: Crypto Taxes in Arizona
1. Does Arizona tax cryptocurrency?
Yes—crypto is taxed as property. Capital gains apply at both federal and state levels.
2. How do I report mined crypto?
Report mining rewards as income at fair market value on Schedule 1 (Form 1040) and Arizona Form 140.
3. Is there sales tax on crypto purchases?
Yes. Buying physical goods with crypto incurs standard Arizona sales tax (5.6%–11.2%).
4. What if I don’t report crypto taxes?
Penalties include fines up to $25,000 or criminal charges for severe evasion.
5. Can I deduct crypto losses?
Yes—up to $3,000 annually against ordinary income, with excess carried forward.
6. Can I pay Arizona taxes with crypto?
No. Arizona discontinued its 2018 crypto tax payment pilot program.
