Cryptocurrencies are generally taxed in two ways, capital gains/losses and income.
When you dispose of cryptocurrency by selling it or trading it away, you realize a capital gain or loss which gets reported on the Form 8949.
When you earn crypto income through interest, staking rewards, mining, airdrops and other crypto rewards, you realize ordinary income based on the fair market value of your crypto at the time of receipt.
This article walks through different options for reporting ordinary income earned through interest, staking, mining, airdrops and other income events.
Do I need to report crypto income?
According to IRS guidelines, crypto investors are required to report the USD value of each income distribution based on the time that it was received. To find out whether you have taxable income to report, navigate to the Taxable Income menu on the Tax Reports page. If you see anything listed on this menu, then you can have crypto income to report.
Where do I report my taxable crypto income?
Generally, crypto income from staking, interest, mining, airdrops and other crypto rewards can be reported on Part 1, Line 8 of the IRS Schedule 1 form.
CoinLedger exports the Schedule 1 form and automatically fills in this section of the form with your Total Income from crypto for you. You can download your Schedule 1 on the Tax Reports page by navigating to Tax Report Downloads > IRS Forms > IRS Schedule 1.
NOTE: The IRS Schedule 1 is only available for 2024 and later. If you are looking to report crypto income for 2023 and earlier, you can use CoinLedger's Income Report.
What if my crypto income was earned as part of a business?
If your crypto income was earned as part of a business it should be reported on the IRS Schedule C.
Examples of earning crypto while operating a business include receiving payments for contract work, running a cryptocurrency mining operation, or operating a node. This is often treated as self-employment income and is reported on Schedule C. Schedule C also allows you to calculate and deduct business expenses such as electricity used for mining to offset your business income. Your net income from Schedule C activity is taxed as ordinary income and is also subject to self-employment tax.
To fill out the IRS Schedule C, you can use the Income totals on the Tax Reports page along with CoinLedger's Income Report.
What is the Income Report?
CoinLedger also exports the Income Report on the Tax Reports page. This is a file detailing all of your crypto income events.
The Income Report provided by CoinLedger is not a filing document but rather a supplementary resource that you (or your tax professional) can use to fill out any relevant income tax forms, such as the Schedule 1 and Schedule C.
If you are an individual and are reporting your crypto income (not as part of a business), you should use the Schedule 1 rather than the Income Report.
Disclaimer: This guide is not intended to be used as official tax advice with regards to which tax form you should choose to report your crypto income. If you are at all unsure which form to use, it's recommended that you consult with a tax professional. To get help with this, visit our CoinLedger Accountant Directory to connect with a recommended crypto tax professional near you.