If you invested in crypto last year, you may be in for a rude awakening this tax season.

Yes, your Bitcoin, Ethereum, and other cryptocurrencies are taxable. The IRS considers cryptocurrency holdings to be “property” for tax purposes, which means your virtual currency is taxed in the same way as any other assets you own, like stocks or gold. And the start of tax season is right around the corner — Jan. 29, 2024 to be exact.

2024 was a big year for crypto, with many investors buying in. The crypto market hit a 60%increase in the year-to-date market cap.

Purchasing Crypto With Dollars

Simply buying virtual currency with U.S. dollars and keeping it within the exchange where you made the purchase or transferring it to your personal wallet does not mean you’ll owe taxes on it at the end of the year.

If your only crypto-related activity this year was purchasing a virtual currency with U.S. dollars, you don’t have to report that to the IRS, based on guidance listed on your Form 1040 tax return.

Just like stocks a 0%-37% of total capital gain for the short term and long-term gain of 0%-20% becomes taxable.

Net Invesment Income Tax

If you have income from investments such as interest, dividends, capital gains, rental and royalty income, and non-qualified annuities. Individual taxpayers are liable for a 3.8 percent NIIT on the lesser of their net investment income, or the amount by which their modified adjusted gross income exceeds the statutory threshold amount based on their filing status.

The statutory threshold amounts are: Married filing jointly — $250,000, Married filing separately — $125,000, Single or head of household — $200,000, or Qualifying widow (er) with a child — $250,000.If you owe NIIT,  Form 8960 PDF, must be filled out.