Do you have to declare crypto on taxes? Yes. Here’s what you need to know about Form 8949
Here’s what to know as you prepare to file your 2023 tax return
There are a few changes for the 2023 tax season. Here’s what’s changed and what you need to know as you prepare to file your taxes.
Claire Hardwick, USA TODAY
Last year was a lousy one for cryptocurrencies.
Even before the demise of FTX and other cryptocurrency exchanges that have since declared bankruptcy, crypto was under stress. For many investors, the FTX Scandal capped a disastrous 2022 that prompted them to cut losses in cryptocurrencies like Bitcoin and Ethereum.
As tax season approaches, you may be wondering if you can deduct those losses from the capital gains you realized during the year. Or if you were lucky enough to earn money by investing in cryptographic or crypto-related assetsyou might be wondering if you should report it to the Internal Revenue Service?
Here’s what to know when preparing your taxes:
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Do you need to declare crypto on taxes?
Yes.
The IRS requires taxpayers to report “all income related to digital assets” on their 2022 federal tax return. Digital assets, as defined by the IRS, include not only cryptocurrency, but also tokens. non-fungible (NFT) and stablecoins.
On your 1040 tax formthe one used to declare personal income, you will have to answer “yes” or “no” to the following question:
“At any time in 2022, did you: (a) receive (as a reward, reward, or payment for goods or services); or (b) sell, trade, gift, or otherwise dispose of a digital asset ( or a financial interest in a digital asset)?”
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If you kept a digital asset in 2022 but didn’t buy or sell more of it or transferred it to another account, you generally don’t have to answer yes, according to IRS instructions. .
However, if you sold digital assets at a loss or profit, you should answer yes to the question and use form 8949 to record your capital gain or loss. You must also tick yes and complete the form if you acquired any new digital assets during the year. This may include digital assets that you may have received as a form of compensation in 2022.
Form 8949
Form 8949 is what you will use to record any transactions you have made for assets that may result in a capital gain or loss. This includes digital assets, stocks, bonds and more. So if, for example, you bought Bitcoin anytime in 2022, you’ll need to record it on the form. Likewise, if you have sold Bitcoin during the year, you will record this on the form.
The form is divided into two parts: transactions relating to short-term fixed assets and long-term fixed assets. Short-term assets are those that you have held for less than a year and are taxed at a higher rate than long-term assets.
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Once you have entered all of your transactions, you will be able to calculate your total short-term and long-term gains or losses that you report on Schedule D of your 1040.
Should I file Form 8949 or Schedule D?
If you only acquired new fixed assets last year, but did not sell any assets you owned at any time in 2022, you may only need to complete Form 8949. However, if you sold assets, you will need to complete Form 8949 and Schedule D.
Can you claim crypto losses on taxes?
Yes, but there are limits.
As with any capital property, you can deduct up to $3,000 per year, or $1,500 if you are married and file a separate return, in capital losses to offset your gains. Or if you made no gain, you can deduct $3,000 from your ordinary income.
If your total losses were more than $3,000, you can carry them forward indefinitely to apply to future tax returns.
Elisabeth Buchwald is personal finance and markets correspondent for USA TODAY. You can FFollow her on Twitter @BuchElisabeth and sign up for our Daily Money newsletter here
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