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Do I Need to Report My Crypto Gains If I Didn’t Sell? According to the IRS, the answer is yes. If you have realized a gain on your crypto holdings, you need to report it, even if you didn’t sell.
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Introduction
If you didn’t sell your crypto, do you need to report it? The answer is maybe. If you didn’t sell, but you exchanged it for goods or services, then you may need to report it. If you exchanged it for another cryptocurrency, then you may also need to report it.
What is the difference between short-term and long-term capital gains?
Short-term capital gains are profits made on investments held for one year or less. Long-term capital gains are profits made on investments held for more than one year. For most assets, the long-term capital gains tax rate is lower than the short-term capital gains tax rate.
The tax treatment of cryptocurrency gains can be confusing because there is no clear guidance from the IRS. However, it is generally agreed that cryptocurrency gains should be treated as either short-term or long-term capital gains, depending on how long you held the assets before selling them.
If you didn’t sell your crypto assets during the year, then you don’t have any realized capital gains and you don’t need to report them on your taxes. However, you may still need to report your unrealized capital gains. Unrealized capital gains refer to profits that you have not yet realized by selling the asset. For example, if you bought Bitcoin for $8,000 and it is now worth $10,000, you have an unrealized gain of $2,000.
You only need to pay taxes on realized capital gains, but you may want to keep track of your unrealized capital gains so that you know how much tax you will owe when you eventually do sell.
How are capital gains taxed?
Capital gains are taxed differently than other types of income. Short-term capital gains, which are gains on assets held for one year or less, are taxed at your marginal tax rate. Long-term capital gains, which are gains on assets held for more than one year, are typically taxed at a lower rate: 15 percent for most taxpayers and 20 percent for high-income taxpayers.
If you didn’t sell your crypto assets during the year, you don’t have any realized capital gains or losses to report on your tax return. But even if you didn’t sell, you may still have to pay taxes on your unrealized capital gains. That’s because the IRS views crypto assets as property, not currency, and they’re subject to capital gains taxes when they increase in value.
The good news is that you only have to pay taxes on your realized capital gains; you don’t have to pay taxes on unrealized capital gains until you actually sell. So if you’re holding onto crypto in the hopes that it will increase in value, you don’t have to worry about paying taxes on it until you cash out.
What if I didn’t sell my crypto?
The tax rules for cryptocurrency are still evolving, and the IRS has yet to provide definitive guidance on how to treat gains or losses from investing in virtual currencies. However, the IRS has said that cryptocurrency should be treated as property for tax purposes, which means that any gains or losses from selling crypto would be subject to capital gains tax.
If you didn’t sell your crypto, then you don’t need to report any gains or losses. However, if you did sell or exchange your crypto, then you may need to report those gains or losses on your taxes. For more information on how to do this, check out our guide on How to Report Crypto Gains & Losses on Your Taxes.
Conclusion
No, you do not need to report your crypto gains if you did not sell.
