Yes, converting one cryptocurrency to another is generally viewed as taxable event. This is because the act of converting one currency to another may result in a capital gain or loss. When you convert one currency to another, you are effectively selling the first currency and buying the second currency. As such, any gains or losses from the transaction will be subject to capital gains tax. This situation is complicated though, and your tax burden can be effectively minimized with proper cryptocurrency tax and accounting software, like Ledgible.
Now that we've answered the question of if you convert crypto to another crypto is it taxable, let's take a look at the crypto tax rate.
What is the tax rate for cryptocurrency in the US?
The US Tax Code classifies cryptocurrencies as property, not currency. If you purchase cryptocurrency, you need to keep track of the date of acquisition and the cost basis. At the end of the year, you will be required to calculate your gain or loss for each coin on hand and then report it on your tax return.
This complex calculation is what makes crypto tax tools like Ledgible so valuable to traders and CPAs. Ledgible automatically calculates capital gains on all of your transactions and ensures you only pay what you have to.
Looking ahead
There are many ways to reduce the amount of cryptocurrency taxes you owe. While a general rule of thumb is booking your losing trades on your taxes to minimize your tax bill, there's easier ways to manage this than just keeping the math in your head. Ledgible Crypto Tax has current year planning baked into their application with no cost, so you can monitor your trades throughout the year and see how they'll potentially impact your tax bill, all without having to bust out the calculator.
