BAM Trading Services Inc. (“Binance.US”) does not provide tax advice. We recommend contacting a tax professional for your specific tax situation. This guide is provided for educational purposes only.
At Binance.US, our mission is to empower Americans through education, advocacy, and product innovation to access a wealth of crypto opportunities. We always build with our customers’ interests at heart — and this extends to tax reporting.
In this guide, we’ll give you an overview of what is and isn’t taxable, summarize the steps you need to take, share documentation that you might need to provide, and outline how gains and losses may affect your taxes. Our goal is to ensure that both you and Binance.US are compliant with the latest IRS directives.
Are you a U.S. resident who conducts cryptocurrency transactions? If so, you may have tax obligations. The Internal Revenue Service (“IRS”) has deemed cryptocurrency to be “property.” Therefore, tax rules that apply to property transactions also apply to cryptocurrencies.
In 2019, the IRS introduced a mandatory check box on Form 1040 U.S. Individual Income Tax Return that requires U.S. taxpayers to answer “yes” or “no” to whether they had any crypto transactions during the year.
Binance.US makes answering this requirement easier by providing you with your transaction history available to download. Learn how to request a copy here. It's an easy, fast, and secure way to view your transaction history.
How do I know if I owe taxes?
Cryptocurrency taxes are incredibly complex. We recommend auditing your crypto transactions to determine whether you owe taxes. Let’s walk through some examples:
What could be taxable?
- Selling crypto for fiat (cash)
- Converting one crypto for another (deemed as the disposition of property)
- Receiving compensation in crypto
- Earning rewards in crypto such as staking rewards
- Paying for goods and services using crypto
Participating in a crypto airdrop is similar to winning money from a giveaway. Generally, this is taxed as ordinary income at the fair market value on receipt date.
Note that if the airdropped tokens are stored in a wallet without being traded, there is no further taxable event.
Further taxability only occurs when one sells, exchanges, or transfers the asset. See the IRS FAQs (Q21 - Q24) and Rev Rul 2019-24 for IRS guidance on forks and airdrops.
Note: Transactions must be reported at their fair market value, and in US dollars.
What is not taxable?
- Transferring crypto from one wallet to another owned by the same person (within Binance.US or across exchanges)
- Buying crypto with cash and holding it in a wallet
- Making donations of crypto to registered charitable or qualified non-profit organizations
- If crypto is donated to a tax-exempt non-profit or charitable organization (registered 501c(3) organization), a donor can claim a charitable deduction equal to the fair market value of the donated cryptocurrency.
- Gifting crypto of up to $16,000 in 2022 ($17,000 for 2023) per recipient per year
- For recipients of a crypto gift, there is no taxable event till the crypto is sold. At the time of sale, the cost basis will be the same as when it was gifted.
- For donors of a crypto gift, there is no taxable event for gifts of up to $16,000 in 2022 ($17,000 for 2023) per recipient per year. Above that, one must file a gift tax return.
Calculating Gains + Losses
Because the IRS considers cryptocurrency to be property, general principles that apply to capital assets reporting apply to crypto. For guidance on reporting methods, consult IRS FAQ Q36-Q38.
The IRS states that US taxpayers are required to report gains and losses, or income earned from crypto rewards (based on certain thresholds) on their annual tax return (Form 1040). This goes for ALL gains and losses — regardless if they are material or not.
Binance.US makes it easy to review your transaction history. Click here to learn how you can request a copy of your transaction history.
After reviewing your activity, you need to perform an audit to evaluate whether you incurred gains or losses. This means reviewing every transaction in your account history to determine the cost basis. This will allow you to evaluate whether a transaction is a loss or a gain.
Your cost basis determines the baseline for whether trades/sales of crypto resulted in a gain or loss. Cost basis is determined at the time of purchase, and refers to the cost of a crypto purchase.
Learn more about proper cryptocurrency cost basis assignment methods here.
Cost Methods When one buys crypto at various points of time and sells certain portions, tax rules allow for lot method selection to create the most favorable tax situation. If you are a frequent trader and this situation pertains to you, please consult with your tax advisor to determine what lot selection is most pertinent for your tax scenario.
Learn more about cost methods here.
Relevant Tax Forms
This form is used to report sales and exchanges of capital assets. If you have crypto transactions that qualify for capital gain/loss, this form should be completed and filed with your annual tax return.
Form 1040, Schedule D
This form is used to report a summary of capital gains and losses. These generally supplement Form 8949.
This form is used to report rewards/ fees income from Staking Rewards, Referral Programs, and other such programs if a customer has earned $600 or more in a tax year.
Additional Guidance from the IRS
The IRS provides some content regarding crypto:
- The official IRS guidance from 2019
- The IRS’ cryptocurrency FAQ
- Publication 544
- Digital Assets | Internal Revenue Service
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Legal disclaimer: This material has been prepared for general informational purposes only and should NOT be: (1) considered an individualized recommendation or advice; or (2) relied upon for any investment activities. All information is provided on an as-is basis and is subject to change without notice. We make no representation or warranty of any kind, express or implied, regarding the accuracy, validity, reliability, availability, or completeness of any such information. Binance.US does NOT provide investment, legal, or tax advice in any manner or form. The ownership of any investment decision(s) exclusively vests with you after analyzing all possible risk factors and by exercising your own independent discretion. Binance.US shall not be liable for any consequences thereof.
Binance.US reserves the right in its sole discretion to amend or change or cancel this announcement at any time and for any reasons without prior notice.