(NewsNation) — Cryptocurrency trading might feel like the Wild West for much of the year, but come tax season, several IRS rules still apply. The IRS treats cryptocurrencies like bitcoin as property, similar to stocks, bonds or gold. That means if you sold crypto during the year, you'll need to report it on your tax return as a capital gain or loss. Depending on how long you held the crypto before selling, you'll owe short-term or long-term capital gains tax on any profit. If you're just holding crypto, and don't sell it, you won't owe taxes on unrealized gains. However, capital gains tax isn't the only thing to consider, as crypto transactions can also trigger ordinary income tax if you receive crypto as payment for work. Here's what to know about cryptocurrency and your taxes. Is meme coin crypto the key to get rich quick or another scam? Do I have to pay taxes on crypto? Maybe. It all depends on how you used your crypto. Certain transactions trigger taxable events, while others don't. If you sold crypto, any gains or losses will typically impact your taxes, just like other investments taxed by the IRS. Spending crypto, like using bitcoin to buy a car, also creates a taxable event. On the other hand, simply buying crypto with cash and holding it in a wallet isn't taxable. Neither is transferring crypto between wallets you own. Bitcoin: What is a crypto reserve and will it happen? Here are a few examples of what is and isn't taxable, according to Coinbase, the largest U.S.-based crypto exchange: Not taxable Buying crypto with cash and holding it Transferring crypto to yourself Donating crypto to a qualified tax-exempt charity or nonprofit Giving or receiving crypto as a gift (up to a certain limit) Taxable Selling crypto for cash (if you sell for more than you paid) Converting one crypto to another Spending crypto on goods and services Getting paid in crypto Mining crypto How is crypto taxed? Crypto can be taxed as capital gains or ordinary income. It depends on how you acquired it and how long you held onto it. Taxed as capital gains Let's say you buy bitcoin. It goes up in value, then you sell it for a profit. You have to pay capital gains tax on the money you make, just like you would selling a stock for a profit. It's worth noting: Capital gains tax on cryptocurrency applies even if you don't convert it to dollars. How to save money on your taxes The tax rate depends on how long you hold it before selling. If you own cryptocurrency for a year or less, you’ll pay short-term capital gains tax. If you sell your cryptocurrency after more than a year, you'll pay long-term capital gains tax, which tends to be a better rate. Short-term capital gain: You bought bitcoin for $6,000 and then sold it for $9,000 six months later. You would owe taxes on the $3,000 in profit at the short-term capital gains tax rate, which depends on your income and ranges from 10% to 37%. Long-term capital gain: You bought bitcoin for $6,000, then sold it for $9,000 two years later. You would owe taxes on the $3,000 you made at the long-term capital gains tax rate, which is either 0%, 15,% or 20% depending on your income and filing status. If you sell your cryptocurrency for a loss, then you may be able to deduct that loss on your taxes, which could lower your overall bill. There are a couple of other scenarios where your cryptocurrency could be taxed as a capital gain: Trading one cryptocurrency for another Buying goods or services using crypto: Your taxable gain would be the value of bitcoin at the time of the purchase, minus what you originally paid for it, according to Fidelity. Taxed as income In some scenarios, crypto gets taxed as income, not as a capital gain. The most obvious example is if you are paid in crypto. In that case, your crypto would be taxed as compensation according to your income tax bracket. While it may not be a traditional paycheck, you are responsible for reporting any crypto income to the IRS. The crypto you receive through mining is also subject to income taxes, according to Coinbase. How much will I owe in crypto taxes? If you earn crypto through your job, it will be taxed as ordinary income. The rate depends on your federal income tax bracket — the higher the income, the higher the tax rate. Currently, tax rates are separated into seven different brackets by income level: 10%, 12%, 22%, 24%, 32%, 35% and 37%. When your income jumps to a higher tax bracket, you don’t pay the higher rate on your entire income. Instead, you are taxed only on the part that is in the higher bracket. 4 ways to maximize your tax refund Your filing status also determines what rate your income gets taxed at. Capital gains and losses If you sell your crypto for more than you paid for it after less than a year, then it gets taxed as a short-term capital gain. If you sell for a profit after holding for more than a year, then it's taxed at a lower rate as a long-term capital gain. Long-term capital gains get taxed at a lower rate, either 0%, 15% or 20% at the federal level depending on your income. Tax rates on long-term gains also vary from state to state. Short-term capital gains are taxed at your ordinary income rate, which tends to be a less favorable rate. If you sell your crypto for less than you paid, then you have a capital loss, which can be used to reduce your taxable income, up to $3,000 in most cases. If your losses are greater than that, you can carry them over to offset future gains. Remember, capital gains tax only applies when you've sold your crypto. You won't pay taxes on unrealized gains if the value has gone up but you haven't sold the asset. TurboTax has a crypto tax calculator you can use to estimate your capital gains/losses. If you received your crypto from mining, the IRS considers it taxable income at the "fair market value" on the day you received it. That fair market value is what you would use to calculate any future gains or losses when you sell it later on. ...read more read less