Cryptocurrencies are generally taxed in two ways, capital gains/losses and ordinary 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 your Tax Reports page within CoinLedger. From here you can view your Total Income amount for the year at the top of the page. The Total Income amount is the calculated fiat value of all income events imported into CoinLedger for that tax year.
Directly below you will see your Taxable Income summary where it displays your separate totals for each income type.
Where do I report my taxable crypto income?
Crypto income does not always fall into one simple tax category. This means that the crypto you receive from mining, staking, interest accounts, or work compensation gets reported on different tax forms, depending on your specific situation.
For this reason, when reporting crypto income you will need you will need to carefully review your specific income transaction types to determine which tax forms you will use.
Tax forms used to report crypto income
You can report most crypto income on Schedule 1 as Other income. (Not subject to self-employment tax) This includes income from airdrops, forks, and other hobby income. Schedule 1 is typically used for miscellaneous income that doesn’t have a better spot elsewhere on the tax return. If you have multiple different types of crypto income, it may be best to separate out the categories and provide as much information as possible.
Example of Schedule 1
If you earned staking income or interest rewards from lending out your crypto, it’s generally reported on Schedule B.
If you earned crypto while operating a business, like 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.
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.
Why don't you export the Schedule 1?
CoinLedger does not export the completed Schedule 1 file or any other income filing documents. This is by design because there are many other line items in the Schedule 1 that you or your tax professional will need to complete. For your privacy and data security CoinLedger does not collect personal data that pertains to the items listed under Additional Income on the Schedule 1.
What is the Income Report?
From the Tax Reports page you can export the Income Report CSV which lists each income distribution in detail.
The Income Report is not a filing document itself, but rather a supplementary file that can be used to complete your relevant ordinary income tax forms like Schedule 1, Schedule B, and Schedule C. You can save this file for your records or send it to your tax professional for their review.
The Income Report provides more details on how your the income calculations were derived including:
Timestamp - the date the asset was acquired according to the timezone applied to your reports.
You can adjust your timezone under your Account Settings
Price At Acquisition - the price per share at the time you received the asset
You do not need to report this amount.
Fair Market Value - the fiat value of the asset at the time it was received. This is the amount that you report as crypto income.
You can adjust your fiat currency under your Account Settings
If you have any questions about reporting your crypto income please send a message to our support team. :)