Is All Crypto Income Taxable? IRS Rules, Capital Gains & Audit Risks Explained

Is all crypto income taxable?

The IRS doesn’t treat every crypto move the same. Selling, trading, mining, staking rewards, and airdrops are taxable. Wallet transfers, collateral staking, and borrowing against crypto are not.

But here’s the catch: if a lender liquidates your collateral, the IRS counts it as a taxable sale.

Clinton Donnelly, founder of CryptoTaxAudit and known as the “Crypto Tax Fixer,” explains the difference between taxable and non-taxable crypto activity, what really needs to be reported, and why shortcuts on your tax return can trigger audits.

Traders ask all the time: Do you need to report every single transaction?

The IRS isn’t just interested in profit; they track “total positive income,” which means the gross proceeds from what you sell before subtracting costs. If your return doesn’t match what they see in 1099s, you’re at risk of an audit.

Another common question: Is borrowing against crypto taxable?

Borrowing isn’t income, so it isn’t taxed. But if the lender seizes your collateral, that liquidation is taxable.

And here’s the part most traders overlook: How do you protect yourself from IRS scrutiny?

The answer is monitoring. TaxShield pulls your IRS file every week to detect underreporting or audit flags before they land in your mailbox, allowing you to fix issues early and avoid years of costly battles.

What you’ll learn in this video:
• Which crypto activities are taxed vs exempt
• Why bottom-line reporting creates audit risk
• The real case of a $150M trader who paid the right tax but still triggered an IRS audit
• How TaxShield gives traders peace of mind against IRS surprises

📞 Protect yourself now:
👉 Book a consultation: https://www.cryptotaxaudit.com/crypto-tax-consultation

👉 Learn more about TaxShield: https://www.cryptotaxaudit.com/taxshield

🔗 Helpful IRS resources:
• IRS Virtual Currency Guidance 👉 https://www.irs.gov/filing/digital-assets

• IRS Form 8949 for Capital Gains 👉 https://www.irs.gov/forms-pubs/about-form-8949

⏱️ Timestamps
00:00 – Is all crypto income taxable?
00:08 – What’s taxable: trading, staking, mining, airdrops
00:37 – What’s not taxable: transfers, collateral staking, borrowing
01:10 – Borrowing vs liquidation: when it becomes taxable
02:02 – Reporting on your tax return
02:30 – IRS “Total Positive Income” explained
03:12 – Why net-only reporting triggers audits
03:35 – Case study: $150M proceeds vs $600k profit
04:36 – How TaxShield protects crypto traders

#CryptoTaxes #CryptoTaxAudit #IRS #CryptoTaxExpert #CryptoTrading

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