Cryptocurrency might seem like uncharted financial territory, but in New York, taxes keep it firmly regulated. New York treats cryptocurrency as property, and whether you’re earning, trading, or mining, the state expects its share. Understanding how these taxes work can save you money and trouble.
How New York taxes cryptocurrency income
New York taxes cryptocurrency income the same way it taxes traditional earnings. If you mine, stake, or earn crypto, the fair market value of your earnings counts as taxable income. Your total income determines the rate, which ranges from 4% to 10.9% for state taxes. Residents in New York City also pay an additional city income tax of 3.078% to 3.876%.
Capital gains taxes on cryptocurrency
When you sell cryptocurrency for more than you paid for it, the profit is considered a capital gain. At the federal level, the tax treatment depends on how long you held the asset. Short-term gains from crypto held for less than a year are taxed as regular income, while long-term gains from assets held over a year are taxed at lower federal rates and depending on your total income.
In New York, however, there is no distinction between short-term and long-term capital gains. The state taxes all capital gains as part of your regular income, meaning they are subject to the same rates that apply to your total taxable income.
What businesses should know about crypto taxes
Businesses must pay taxes on cryptocurrency transactions based on their structure. C corporations pay state income taxes of at least 6.5%, while LLCs, partnerships, and S corporations often pass gains and losses directly to owners.
Businesses paying employees in crypto or accepting crypto for sales must calculate the fair market value at the time of the transaction. This ensures proper reporting for payroll and sales taxes.
The importance of accurate records
Keeping thorough records of purchase prices, sale prices, and holding periods can help you accurately calculate your tax obligations. Proper planning around the timing of sales and consideration of federal and state rules can significantly impact how much you owe and protect you from criminal tax liability.