Yes. Crypto gains are taxed at a regular capital gains rate: 10 to 37% for short-term gains and 0 to 20% for long-term gains.
According to the IRS, these three are non-taxable and don’t need reporting:
- Buying crypto with cash and holding it (affectionately known as HODLing)
- Donating crypto to a qualified tax-exempt charity or non-profit
- Transferring crypto between wallets
Whereas the following do need to be reported and will be taxed as capital gains:
- Selling crypto for cash (even if you lost money on your initial investment)
- Using crypto to pay for goods or services
- Exchanging one crypto for another
- Mined crypto.
- Being paid in crypto or by airdrop.
- Receiving crypto as a bonus or a reward
If you don’t declare your holdings you can get penalized. It’s the same penalties for unpaid taxes – and as the IRS themselves say, “they can add up fast”:
- A late filing fee
- A late payment fee
- Interest on top of both penalties
Your total penalty could amount to 25% or more of your unpaid tax amount.