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Frequently Asked Questions
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. Cryptocurrency taxes are incredibly complex. We recommend auditing your crypto transactions or consulting a tax professional to determine whether you owe taxes.
Transactions that could be taxable include: 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, airdrops, and more.
Transactions that are not taxable include: 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, gifting crypto of up to $16,000 in 2022 ($17,000 for 2023) per recipient per year, and more.
Because the IRS considers cryptocurrency to be property, general principles that apply to capital assets reporting apply to crypto. According to the IRS, U.S. taxpayers are required to report gains and losses, or income earned from crypto rewards on their annual tax return (Form 1040). This goes for all gains and losses — regardless if they are material or not. To download your transaction history, log in and visit https://www.binance.us/en/settings/tax. 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.
Binance.US is required to provide a 1099-MISC tax form to all eligible customers who earned $600 or more from staking and referral rewards in 2022. The 1042-S tax form, available only to non-U.S. residents, will be ready to download on March 3, 2023.
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Disclaimer: This article is for informational purposes only. BAM Trading Services Inc. ("Binance.US") does not provide tax advice. We recommend contacting. a tax professional for your specific tax situation.