As the IRS states, people engage in a hobby for recreation, not to make a profit. 

Most taxpayers buy, trade or exchange crypto as a hobby and through passage of time, interest, skill building and/or potential gains, the activity becomes more frequent (investing or re-investing) and a profit becomes the main motive, then such crypto activity could potentially be considered a for-profit business activity. 

After a certain financial threshold, your crypto hobby will be considered a crypto business and increase your tax burden.  A business is subject to self-employment taxes, i.e. HIGHER Taxes, especially if you don’t have a business entity where you can benefit from write-offs and deductions.

Let’s connect to explore tax optimization strategies with Akif CPA

Ask a Question