As per current laws, cryptocurrency earnings fall under the purview of taxable income. In the United States, the Internal Revenue Service (IRS) considers cryptocurrency as property for federal tax purposes. This means that any profits or gains earned from the sale or exchange of cryptocurrency is considered taxable income and must be reported on one's tax returns.
Therefore, attempting to avoid or evade taxes on cryptocurrency earnings is illegal and can lead to serious legal consequences. This includes penalties, fines, and criminal charges.
However, there are certain strategies that can be employed to minimize tax liability on cryptocurrency earnings. For instance, holding cryptocurrency for more than one year before selling or trading it can result in lower tax rates as it qualifies for long-term capital gains. Additionally, utilizing tax loss harvesting techniques may also help to reduce tax burdens.
If an individual is unsure about their tax responsibilities related to cryptocurrency, it is recommended that they seek the advice of a licensed tax attorney or accountant to ensure compliance with relevant laws and regulations.
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