Crypto and Taxes: What You Need to Know About the IRS and Digital Currency

Financial Horizons: Insights for Building Wealth and Securing Your Legacy

By Dr. Jose G. Cardenas, Chief Tax Strategist at The C & R Group, LLC

Cryptocurrency continues to reshape how we think about money, investing, and even privacy. But as crypto evolves, so too does the IRS’s approach to taxing it. Whether you’re a casual investor, active trader, or crypto entrepreneur, understanding the tax landscape is crucial to avoid costly surprises.

So let’s clear the fog.

Is Cryptocurrency Taxable?

Yes. In the eyes of the IRS, cryptocurrency is considered property, not currency. This means any time you sell, trade, or spend crypto, you could be triggering a taxable event — similar to selling stock.

Taxable events include:

• Selling crypto for cash
• Trading one crypto for another
• Using crypto to buy goods/services
• Earning crypto through mining, staking, or as income

Capital Gains vs. Ordinary Income

How your crypto is taxed depends on how you received it and how long you held it:

• Capital gains tax applies if you held your crypto as an investment. Gains are taxed at either short-term (ordinary income rates) or long-term (0%, 15%, or 20%) rates.
• Ordinary income tax applies if you earned crypto through work, mining, staking, or airdrops.

Common Tax Pitfalls to Avoid

1. Not Reporting Transactions – The IRS receives reports from exchanges like Coinbase. Ignoring crypto transactions is a red flag.
2. Mixing Personal and Business Use – Using crypto for both personal and business purposes? Keep meticulous records.
3. Failing to Track Cost Basis – Knowing what you paid for your crypto (cost basis) is essential to accurately calculate capital gains.

Special Rules? Not Yet — But Stay Alert

Many people believe crypto should have its own tax classification due to its decentralized and volatile nature. But until Congress creates new laws, the current tax rules apply. The IRS has already increased enforcement efforts and added crypto questions to tax forms — making compliance a top priority.

What Should You Do Next?

If you're holding or transacting in crypto, here are three steps to take:

• Get organized: Use a crypto tracking tool to log every transaction.
• Talk to a tax strategist: Not all CPAs understand the crypto space. You need someone with experience in both taxation and alternative investments.
• Plan ahead: Strategies like tax-loss harvesting or establishing business entities can help reduce crypto-related tax liabilities.

Bottom Line:
Crypto isn’t “off the grid” — it’s fully in the IRS’s spotlight. Whether you believe it should be taxed differently or not at all, what matters is how it’s taxed today — and how you position yourself for tomorrow.

About the Author

Dr. Jose G. Cardenas is a retired U.S. Army Finance Officer and the Chief Tax Strategist at The C & R Group, LLC. With a Doctorate in Business Administration and over 20 years of experience in financial strategy, tax planning, and life insurance, Dr. Cardenas helps individuals and business owners protect their wealth and build a legacy. Learn more at www.thecrgroupllc.com.

📌 Disclosure: This article is for educational and informational purposes only and is not intended to serve as personalized legal or investment advice. Dr. Jose G. Cardenas, DBA, provides tax advisory services through The C & R Group, LLC. Insurance strategies, including Indexed Universal Life (IUL) and annuity products, may be offered through his role as a licensed financial professional affiliated with Experior Financial Group.

#CryptoTaxes #DigitalAssets #TaxStrategy #FinancialHorizons #CRGroup #WealthBuilding #TaxCompliance #DrJoseCardenas