Crypto is a huge industry that covers everything from technology to currencies, and even how it's taxed. First off, you don’t owe taxes on crypto if you’re merely “hodling,” as aficionados would say. But if you’ve gained any income from crypto in a financial  year — either from staking, lending, or selling — you may owe taxes on the proceeds.

The IRS treats all cryptocurrencies as capital assets, and that means you owe capital gains taxes when they’re sold at a profit. This is exactly what happens when you sell more traditional securities, like stocks or funds, for a gain.

Let’s say you bought $1,000 in Ethereum and then sold the coins later for $1,600. You’ll need to report that $600 capital gain on your taxes. The taxes you owe depend on the length of time you held your coins.

If you held your ETH for one year or less, the $600 profit would be taxed as a short-term capital gain. Short-term capital gains are taxed the same as regular income — and that means your adjusted gross income (AGI) determines the tax rate you pay.

Federal income tax brackets top out at a rate of 37%. To be in the top bracket for 2023, you would need to make $578,126 or more as a single filer.

In this article, we'll discuss some of the basics of how crypto is taxed. We'll also go through tips for saving tax when dealing with cryptocurrencies.

Crypto Is Taxed in Two Ways

There are two ways to tax crypto: as property and as a commodity.

Property taxes apply when you buy, sell or trade cryptocurrencies. Commodity taxes apply if you use your crypto to pay for goods or services — for example buying things from Amazon with Bitcoin.

How Is Crypto Taxed?

Cryptocurrency is taxed as property. This means that you can claim the fair market value of your cryptocurrency in the year it was acquired and later sold or exchanged for other cryptocurrencies, fiat currency, or goods/services.

Cryptocurrency is not taxed as a currency. The income tax treatment of cryptocurrencies varies depending on whether you're purchasing them through an exchange (such as Coinbase), mining them yourself, or earning them through another activity like freelance work.

If you mine coins yourself, they are considered capital gains and reported on Schedule D with other business assets held at fair market value when sold off at their peak price during 2017-2018; however, if they were mined during 2014-2015 then they would be treated like ordinary income instead since there weren't any real-world uses for this type of digital money yet back then!

Cryptocurrencies may be considered business income under Section 199A(a)(1)(B) which exempts certain trades done by non-corporate entities from taxation but only if those trades meet specific criteria such as being done "for consideration" (defined below). In order for something to qualify under section 199A(a)(1)(B), two conditions must be met: 1) You must have received payment/gains derived from selling goods/services 2) Those gains were derived from selling goods/services that had been produced either domestically located within United States territory OR imported into United States territory AND THEN EXPORTED OUTSIDE OF US TERRITORY.

What Happens if You Don’t Report Cryptocurrency on Taxes?

If you don't report cryptocurrency on taxes, you could face a penalty. This can range from a fine to jail time for tax evasion and other criminal charges, depending on the laws in your country. In addition to facing criminal penalties for failing to report crypto income, there are also some civil penalties that apply if you don't pay back taxes owed from crypto-based income:

• Interest accrued on any unpaid taxes owed by late payment
• Amounts owed in restitution (if applicable)

Tips to Save Tax on Your Crypto Gains

• Keep a record of your crypto transactions.
• Use a crypto tax software to calculate your taxes.
• Invest in tax-advantaged retirement accounts, such as an employer-sponsored 401(k) or traditional IRA. If you don't have enough money saved up from working, consider opening one of these accounts through an online broker like Charles Schwab or Vanguard — and then use it to buy Bitcoin or other cryptocurrencies! You can also set up a self-directed IRA so that you control how the funds are invested and who uses them for expenses like traveling outside the country (taxes will apply).

Like any other investment, the IRS will demand a share of your crypto profits, unless you follow certain tax strategies.

The IRS is aware of cryptocurrency, and it's looking for you. Since the IRS has been auditing cryptocurrency investors and issuing 1099-K forms to individuals who have made taxable gains from their crypto investments, it's clear that they know something about cryptocurrencies.

The IRS has also been targeting exchanges and other businesses involved with cryptocurrency trading or holding cryptocurrencies themselves. If you're an exchange and don't report your income correctly, this could result in hefty penalties from the IRS — and even more serious consequences if you're found guilty of evading taxes altogether!

Conclusion

Crypto is a hot topic, with many people wondering how they should use it and report it on taxes. The IRS says that crypto is taxable as property or capital gains, depending on the type of crypto you own and what you do with it after receiving your profits. You can also report crypto-based income for other tax purposes (such as self-employment), but only if you have documentation to prove when the event occurred and how much income was generated from these transactions (which may be difficult).

Crypto staking is an innovative way to earn passive income from cryptocurrencies. It offers a great opportunity for cryptocurrency investors to make money without having to actively trade or mine.

In this comprehensive guide, we will discuss what crypto staking is, how it works, the different types of staking, the risks and rewards associated with it, and the best staking platforms to get started.

Whether you are a beginner or an experienced investor, this guide will provide you with the necessary information to help you make informed decisions about crypto staking. With this guide, you will be well on your way to growing your cryptocurrency portfolio in no time.

What is Crypto Staking?

We’ve all heard of mining cryptocurrencies, but did you know there are other ways to earn coins? One of those methods is known as staking, which refers to the process of earning interest on coins held in a staking wallet or a smart contract. The interest is paid out in the form of cryptocurrencies, usually the native token of the platform you are staking your crypto on.‍

Staking is a low-maintenance way of earning extra coins, and it’s available to most cryptocurrencies, including the ones with a proof-of-work consensus like bitcoin. Just remember, the more popular coins, like bitcoin, have a much lower chance of generating a stake, making them less profitable than smaller alt coins and tokens.

How Does Crypto Staking Work?

When you stake a cryptocurrency, you’re lending your coins to the network in exchange for a percentage of the network’s new coins. Your coins are held in a staking wallet (or a smart contract), which is a designated software program designed to facilitate the staking process. The staking wallet holds your coins for you until the end of the staking period, during which time those coins are unavailable for trading.

When the staking period ends, the staking wallet sends your coins back to your wallet along with any rewards earned through staking. The amount of reward earned through staking depends on the network’s collective staking power, which is often determined by the number of coins held in the staking wallet.

Types of Crypto Staking

Proof-of-Stake (PoS) - Proof-of-stake is a broad consensus method that doesn’t require energy-intensive mining. Instead, coins held in a wallet earn interest as a form of reward. The amount of interest earned is based on the number of coins held. PoS is used by a number of popular blockchain networks, like Ethereum. 

Delegated-Proof-of-Stake (DPoS) - Delegated-proof-of-stake is a variation of proof-of-stake that allows network members to vote on delegates to manage the network. The more coins that are staked, the more voting power is available to select delegates. The delegates are responsible for validating transactions on the blockchain and receiving a cut of any transaction fees as a reward.

Risks and Rewards of Crypto Staking

One potential risk is the possibility of losing access to your staked coins. If you are staking your coins on a third-party platform or through a staking pool, there is a chance that the platform could become inaccessible or go offline. This could prevent you from being able to access your staked coins or claim your rewards.

Another risk is the potential for your staked coins to be stolen. If you are staking your coins on a platform that is not secure, or if you are using an insecure wallet to store your staked coins, there is a chance that your coins could be stolen by hackers. This could result in significant losses, especially if the stolen coins are a large portion of your overall cryptocurrency holdings.

Finally, there is also the risk of volatility in the cryptocurrency market. The value of your staked coins could go up or down depending on market conditions, and this could affect the potential rewards you receive from staking. If the value of your staked coins decreases significantly, you could end up losing money even if you are earning rewards through staking.

Overall, staking cryptocurrencies can be a good way to earn rewards and help secure a blockchain network, but it is important to carefully consider the risks before deciding to stake your coins. It may be helpful to do some research and carefully evaluate the security and reliability of any platform or staking pool that you are considering using.

Tips for Successful Crypto Staking

Here are a few tips and tricks for you to ensure a successful crypto-staking trajectory:

• Find a cryptocurrency with a high potential for growth. Staking is only beneficial if the network is growing and gaining value. 
• Don’t spread yourself too thin by investing in too many networks. Staking is a long-term strategy, so it’s best to focus your efforts on one network at a time. 
• Don’t forget to reinvest the rewards you earn through staking. Reinvesting will help to grow your investment, which is the ultimate goal for staking.

Final Thoughts on Crypto Staking

Staking is an excellent way to earn passive income from cryptocurrencies, especially for those who want to earn income without trading or mining. The more coins that are staked, the more rewards are earned through staking.

Non-Fungible Tokens, or NFTs, have exploded in popularity in recent years, with many people looking to invest in or collect these unique crypto tokens. However, not all NFTs are created equal – some are more valuable than others. One key factor that determines the value of an NFT is rarity. In this article, we will explore what NFT rarity is, how it works, and how to determine the rarity of an NFT. By understanding these concepts, investors can make more informed decisions when it comes to buying and selling NFTs.‍

What are Non-Fungible Tokens (NFTs)?

Non-Fungible Tokens (NFTs) are a type of cryptocurrency token, like Bitcoin or Dogecoin. However, what sets NFTs apart from other crypto tokens is their "non-fungibility," meaning that they cannot be mutually exchanged. In other words, every NFT is unique and has its own set of properties, making them distinct from one another.

NFTs have become a popular market, with some tokens having high value compared to others. This has led to a surge in interest in NFTs, with many people wanting to invest in or collect them.

What is NFT Rarity?

One factor that determines the value of an NFT is rarity. NFT rarity refers to how common a specific NFT is within a collection. Typically, the rarer the NFT, the higher its price.

In simple words, NFT rarity refers to the uniqueness or scarcity of a non-fungible token (NFT). Each NFT is created with a unique identifier that makes it distinct from all other NFTs. However, within a collection of NFTs, there can be variations in the rarity or scarcity of the different tokens.

These variations can be based on a variety of factors such as the number of tokens in a collection, the design or artwork of the token, or the properties and attributes assigned to the token. Rarity can impact the value of an NFT, as collectors and investors may be willing to pay more for a rare or highly sought-after NFT. Additionally, NFT creators and collectors may use rarity as a way to create excitement and interest in a particular collection or token.

How Does NFT Rarity Work?

To understand how NFT rarity works, it's important to know that when a new NFT is minted, it has a set of unique properties, known as traits, that cannot be changed. While NFTs can share a trait, no two NFTs are typically identical in a randomized collection.

NFTs with rarer features are more likely to sell for a higher price than those with more common features. As the floor price of a collection increases, the rarer NFTs also tend to increase more in value than the average of the entire collection.

How to Determine NFT Rarity?

Knowing how to spot rarity beforehand can give investors an advantage when it comes to NFT collecting. This can save them time and money, and give them an edge over other traders in the marketplace with information about the value trajectory of a specific type of NFT over time.

There are a few different ways to determine the rarity of an NFT. One way is to use NFT Rarity sites like Rarity Tools. This can help you find if an NFT is rare and in high demand.

Another option is to use a Rarity Ranks Extension, such as the Rarity Ranks extension. However, installing extensions may be risky and steal your confidential data.

Another way to determine NFT rarity is to use a tool like OpenSea, which allows users to create, buy, and sell NFTs. By viewing an entire collection when clicking on an NFT, users can get a sense of the rarity of a specific token. The average collection size is 10,000 items, though this can vary for different projects.

Best NFT Rarity Checker

Determining the rarity of an NFT (Non-Fungible Token) is an important aspect of the NFT market. It can help buyers make informed decisions about the value and potential appreciation of a particular NFT. While there are several NFT rarity checkers available, it's difficult to identify the "best" one as different checkers may use different algorithms and data sources. Some popular NFT rarity checkers include Rarity.tools and Rarity Sniper.

Rarity.tools is a widely used platform that allows users to check rarity scores for a variety of NFT collections. Rarity Sniper provides a rarity score for each NFT, along with data on its trading history and price trends. Ultimately, the best NFT rarity checker depends on individual preferences and needs.

Why is Rarity Important for NFTs?

Rarity is important in the NFT market because it can affect the value and demand for a specific token. Because each look is limited to a specific number across the collection, some are statistically harder to come by – just like a Shiny Pokémon in the Pokémon universe. An NFT with a combination of rare attributes is more likely to sell for a higher price than those with more common traits.

Conclusion

In conclusion, NFT rarity is a key factor in determining the value of an NFT. By understanding how to spot and assess rarity, investors can make more informed decisions when it comes to buying and selling NFTs.

Tools like the NFT Rarity App and the Rarity Ranks Extension can be helpful in determining the rarity of a specific NFT. With this knowledge, investors can make more strategic decisions about their NFT investments and potentially maximize their returns.

Disclaimer

The information provided on this website does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the website's content as such.

Token Metrics does not recommend that any cryptocurrency/NFT should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.