When you sell cryptocurrency, you are subject to the federal capital gains tax. This is the same tax you pay for the sale of other assets, including stocks.
Capital gains taxes are a percentage of your gain, or profit. There is not a single percentage used; instead, the percentage is determined by two factors:
How long you owned the cryptocurrency before selling it. If you own it for more than a year, you’ll generally pay less in taxes than what you’d pay if you sold it sooner.
Your total taxable income for the year in which you sold the cryptocurrency. In general, the higher your taxable income, the higher your rate will be.
You are only taxed on cryptocurrency if you sell it, whether for cash or for another cryptocurrency. So, if you bought $100 of cryptocurrency that is now worth $200 and you still own it, you aren’t taxed.
Short-term capital gains tax for crypto
If you own cryptocurrency for one year or less before selling, you’ll pay the short-term capital gains tax….
This article was written by Kurt Woock and originally published on www.nerdwallet.com