0% - 37% depending on tax bracket and tax period.
Realization of gains. Coin to coin trade as well as coin to fiat trade.
Depending on how long you hold it, it can be a long or short-term capital gain that is subject to different rates.
Included in the annual income tax return in the year the sale is reported.
Why is crypto Taxed like that in the US?
In the US, Crypto is seen as property, which attracts CGT when disposed of. In Notice 2014-21 the IRS stated:
“The Internal Revenue Service (IRS) is aware that “virtual currency” may be used to pay for goods or services, or held for investment. Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value.
… the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability.”
The Federal tax rate on cryptocurrency capital gains ranges from 0% to 37% (FY2020). When crypto is bought, the purchase price should be recorded. This is the cost base of the crypto asset. When the crypto is disposed of, the disposal price is the selling price. The selling price minus the cost base is the capital gain. Taxpayers will be required to determine the fair market value of the virtual currency in US dollars as of the date of payment or receipt.
Any gains or losses made from a crypto asset held less than 12 months are taxed at the upper marginal tax bracket in which your taxable income falls. Any losses can be used to offset income tax by a maximum of USD $3,000. Any further losses can be carried forward.
If the crypto was held in excess of 12 months (a long-term capital gain), then the applicable tax rate is much lower, and is either 0%, 15%, or 20%, depending on the individual or combined marital income.
Disclaimer: This is not a legal, tax, accounting or investment advice. It is general information which should only be used for introduction purposes. You should consult with a tax/legal specialist.