When did crypto become taxable?

In the United States, crypto became clearly taxable on March 25, 2014, when the IRS issued Notice 2014-21 and said virtual currency is treated as property for federal tax purposes. The notice did not create a new tax. It explained how existing rules for property, wages and business income apply to coins such as bitcoin. Since then the IRS has added guidance and reporting rules step by step.

What did IRS Notice 2014-21 say?

The notice answered 16 questions. Its central point was that general tax rules for property apply to virtual currency, so selling or spending it can produce a capital gain or loss. It also said virtual currency is not legal tender anywhere and does not produce foreign currency gains or losses.

According to the IRS release that came with it, wages paid in virtual currency are taxable, must be reported on Form W-2 and are subject to withholding and payroll taxes. The notice added that mined coins count as income at their fair market value on the day received, and that mining as a business is subject to self-employment tax.

Was crypto taxed before 2014?

The notice did not say outright whether it applied to earlier years. Its penalty section, though, addressed returns that treated crypto in a way inconsistent with the notice before March 25, 2014. For those, it said penalty relief may be available if the taxpayer can show reasonable cause. In practice, 2014 is treated as the start of formal US crypto tax guidance rather than the start of tax law that could apply to it.

When did the IRS start asking about crypto?

In July 2019 the IRS began sending educational letters to more than 10,000 people who may have misreported crypto, and in October 2019 it issued Revenue Ruling 2019-24 on hard forks plus a set of FAQs. Hard forks are covered in are hard forks taxable.

A virtual currency question first appeared on the 2019 return, on Schedule 1, which few filers used. In December 2020 the IRS moved the question to the top of Form 1040, just below the name and address, The Block reported. The current wording is explained in what is the digital asset question on Form 1040.

How has crypto tax law changed since then?

Revenue Ruling 2023-14 said staking rewards count as income in the year the taxpayer gains control over them. The Infrastructure Investment and Jobs Act of 2021 set a tax definition of digital assets and led to broker reporting. Under the IRS digital assets page, brokers report gross proceeds on Form 1099-DA for transactions from January 1, 2025, and cost basis for certain transactions from January 1, 2026. The IRS now uses "digital asset" in place of the older "virtual currency" term. Today's overall rules are in how crypto is taxed in the US, and the forms are in crypto tax forms.

Rules differ by country and change often. Check the tax authority or a qualified professional for your own situation.