Blockfi wallet

Blockfi Login

Cryptocurrency Tax 101 — Intro to capital gains and crypto tax treatment

At BloĉkFi, we want to increase the knowledge and awareness of the impact made by blockchain and crypto products. One topic most people don’t seem to be aware of, even as cryptoasset owners, is the benefits and implications of crypto taxes. We break it down for you to understand exactly what that means and how it could affect you this tax season.

Disclaimer: This post is for informational purposes only and should not be relied on or construed as tax advice or investment advice. It is best to consult with applicable professionals before making investment or tax-related decisions.


  1. Cryptocurrency is treated as property by the IRS. Trades, sales, and purchases using crypto are taxable events, subject to short and long-term capital gains/losses tax treatment.
  2. Borrowing USD against your cryptoassets with a BloĉkFi loan is not a taxable event. This means you can access liquidity while keeping the same level of ownership and upside in your crypto holdings.
  3. The after-tax cost of borrowing can be reduced if you use the proceeds of the loan to make certain types of investments.

Background — Crypto Tax Treatment in the US

In 2014, the IRS let cryptoasset investors know that “the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability.”

The IRS treats “virtual currency” as property, which means every trade you complete with cryptoassets is a taxable event. If you sell your cryptoassets to purchase goods (iPhone X or a 1965 Ford Mustang) or services (an event planner for your Grandmother’s 90th birthday bash or a developer to build an app for your business), it’s a taxable event. If you exchange your Ether for Bitcoin or vice versa, it’s a taxable event. If you liquidate your cryptoassets for USD, it’s a taxable event.

However, if you put up cryptoassets as collateral for a loan — which does not qualify as a trade — it’s not a taxable event.

A BloĉkFi loan allows you to achieve liquidity on your Bitcoin and Ether without triggering a taxable event. And depending on how you’re spending the money you borrow from BlockFi, you may be eligible for additional tax benefits.


Due to the increasing popularity and value of certain cryptoassets, you have the potential to make a substantial return by purchasing Bitcoin or Ether for investment purposes. It’s important to understand how capital gains taxes work if your crypto investments increase in value.

A capital gain occurs when you sell a cryptoasset for more than you spent to buy a cryptoasset.

In some cases, capital gains taxes can add a substantial amount to your tax bill. When considering your capital gains tax costs you should consider the following variables: federal tax rates (which offer preferential treatment for long-term capital gains) and state income tax rates.

Federal tax rates and short vs long-term capital gains?

At the federal level, the amount of time you hold onto a cryptoasset has an impact on your capital gains tax rate.

If you have held assets for less than a year then they are subject to short-term capital gains rates which are the same as your ordinary income tax rate.

If you have held assets for more than a year then gains are subject to preferential, long-term capital gains tax treatment. The table below show the ordinary income and long-term capital gains tax brackets for the 2017 tax year (please note that tax rates in 2018 are different than what is listed below).