Yes, cryptocurrency can be taxed. The IRS treats cryptocurrencies as property, meaning that transactions involving cryptocurrencies are subject to capital gains tax rules. This includes anything from buying goods or services with crypto to exchanging or selling it for profit.

For example, if you purchase an item with crypto and the value of your holdings has increased since you bought them, you’ll owe capital gains tax on the profit. If you sell crypto at a loss, you can use that loss to offset other capital gains or up to $3,000 of ordinary income.

Business owners accepting crypto as payment face tax implications as well. The IRS sees any transaction involving crypto as taxable, so businesses must report the fair market value of crypto received and account for potential capital gains or losses when they sell or use that crypto.

Despite any tax forms you might receive from exchanges, it’s ultimately your responsibility to report all crypto transactions on your tax return. This includes keeping records of all crypto purchases and sales to avoid underreporting and potential penalties. Consulting a tax professional is highly recommended, especially since crypto tax rules are evolving.