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.
Jump Ahead:
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?
Crypto income does not always fall neatly into one simple tax category. This means that crypto income from mining, staking, airdrops, etc. gets reported on various different tax forms depending on the type of income as well as your specific tax situation.
When reporting crypto income you or your tax professional will need to carefully review your specific income transaction types to determine which tax forms you will use. CoinLedger provides an Income Report which makes this process simple - jump ahead to this section for more details.
Tax forms used to report crypto income
Schedule 1
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
Schedule B
If you earned staking income or interest rewards from lending out your crypto, it’s generally reported on Schedule B.
Schedule C
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.
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?
If you received any crypto income this year (such as crypto acquired from staking, mining, interest, airdrop rewards, forks, gifts, or payments) then you should download the Income Report from the Tax Reports page of your CoinLedger account. This will give you a file with all your ordinary income from your crypto activity to report on your tax return. This Income Report should also be sent to your tax professional along with your Form 8949.
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 these relevant ordinary income tax forms, such as the Schedule 1, Schedule B, and Schedule C. CoinLedger's Income Report should be used to accurately fill out these forms.
The Income Report provides more details on how your 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
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.