Tl;dr: It’s tax season in the US, which means it’s important to understand how the IRS treats crypto assets. Coinbase offers a Tax Center to help make this process easier and help you with all of your crypto tax needs.
At Coinbase, we’re working hard to help update the financial system by building trusted products that expand the utility and adoption of crypto, because we believe crypto and blockchain technology have the ability to increase economic freedom and opportunity around the world. Coinbase is an American publicly traded company and we work hard to meet our compliance and regulatory obligations in the US and in any jurisdiction in which we operate. Helping our customers comply with tax rules is just one of the ways we make it easier for Americans to embrace the benefits of the crypto economy. Today, we want to discuss how the Internal Revenue Service (IRS) treats crypto assets in the US, and how Coinbase remains committed to compliance in all jurisdictions in which we operate.
As tax season rolls around once again in the US, it's important to remember that cryptocurrency transactions may be taxable. At Coinbase, our mission is to be the most trusted crypto platform, so we embrace a compliance-oriented culture, including paying our taxes and helping our customers pay theirs. Adhering to regulatory requirements in all jurisdictions in which Coinbase operates ensures that we keep our customers - and the broader financial ecosystem - safe. To this end, we offer tools and resources to help facilitate the tax reporting needs for our users.
The IRS treats digital assets broadly as “property” for federal tax purposes. Because digital assets are classified as property, cryptocurrencies are taxed similarly to other financial and non-financial assets. While the definition of property is broad, the IRS has given us a basic framework by which to operate and ensure that our customers remain compliant. This is the type of basic guidance and working relationship that we’re asking for from other agencies like the SEC and CFTC.
The sale or exchange of most crypto by retail customers is taxed at capital gains tax rates, either as long-term capital gains or as short-term capital gains. Typically, if you hold crypto for more than one year it is taxed at the more favorable long-term rate. Individuals are also subject to state and local income taxes on these gains, where applicable, and certain higher-income individuals may also be subject to the net investment income tax on these gains.
Exchanges or brokers, including Coinbase, may be required by the IRS to report certain types of activity (such as staking rewards) directly to the IRS using similar forms (1099) to those in traditional finance. Taxpayers also need to report any income or gains from crypto-related activities to the IRS on their tax returns, whether or not information returns are reported to the IRS.
We understand that figuring out what is owed to the IRS can be tricky even for tax professionals. That's why we proactively email our US users to provide them with tax resources including our Tax Center (currently available only to retail clients), where you can view your taxable activity, and understand your capital gains and other crypto income.
Other helpful features of the Tax Center include:
Downloadable 1099 forms - in the summary tab, customers can submit their 1099 electronically to their personal accountants or directly to a tax prep service like TurboTax or H&R Block.
Downloadable Gain/Loss reports - customers can download reports to help with tax reporting, such as a gain/loss report, which is a roundup of every transaction made on Coinbase that resulted in a capital gain or loss.
Automatic import of your Coinbase activity -directly import your activity into top tax filing softwares like TurboTax and H&R Block.
Pre-filled Form 8949 - access all of your 8949 forms for all of your annual activity dating back through 2021 (Coinbase One subscribers).
Aggregate tax data across platforms - Coinbase has partnered with CoinTracker to provide customers with an accurate view of their gains and losses across different platforms. New CoinTracker customers get free tax reports (up to 3,000 transactions) and all customers get 10% off CoinTracker tax plans.
Coinbase is working diligently to expand its tax support and offerings to make tax compliance easier, more efficient, and faster. In addition, Coinbase offers educational articles to help users understand crypto taxes, including:
Capital Gains Tax: What Is It and How It Applies to Your Crypto
Tax Forms, Explained: A Guide to U.S. Tax Forms and Crypto Reports
At Coinbase, we make sure our products and services remain as compliant as possible in all the jurisdictions in which we operate. We want our customers to know that they are safe and secure on the Coinbase platform, and provide them with industry-leading tools and resources to help report their taxable activity, simplify the tax reporting process, and make the cryptoeconomy accessible for all.