Finding the jackpot is wonderful, but crypto gaming profits can be confusing. How are they taxed? Crypto players, prepare for tax season by knowing crypto gambling taxes.
Capital Gains vs. Ordinary Income
Two basic approaches to tax crypto gaming winnings:
Ordinary Income
The most common scenario is ordinary income. The IRS considers crypto earnings, including gambling winnings, conventional income like wages or interest. You’ll pay income tax on the crypto’s fair market value when received.
Capital Gains
If you stick onto your crypto wins and sell them for a profit, you’ll pay capital gains tax. Your income tax bracket and how long you held the crypto before selling determine this tax rate.
Importance of Recordkeeping
Crypto gaming taxes require precise record keeping. Track your gambling platform bitcoin deposits and withdrawals and their fair market worth. This will help you compute regular income and capital gains taxes later.
Gray Area Navigation
The IRS provides some information, but crypto gaming taxes are unclear. What if you lose more crypto than you win? Gambling losses are currently deductible up to your earnings, but consult a crypto-savvy tax professional.
Conclusion
Crypto gambling might be fun and profitable, but Uncle Sam wants his part. You may confidently handle tax time and enjoy your crypto successes by understanding the two main tax types and keeping precise records.