TL;DR – If you file your taxes with TurboTax, you’re now able to receive your tax refund through Coinbase (this is currently only in America). This means that you can deposit USD straight into your Coinbase account or convert your refund into crypto.
What a time to be alive!
Imagine saying to someone 10—heck, 5—years ago, “I’d love to get my tax refund as cryptocurrency.”
They’d probably giggle to themselves or laugh at you (some people might even still do that)!
But, here we are. Times are changing and how we view money is evolving.
The Partnership
Last week, Coinbase launched a direct-deposit program with TurboTax. It allows the delivery of state and federal tax refunds to a Coinbase user’s account.
The great thing about this is that not only can you receive your refund in USD (directly to your Coinbase account), but you can also convert your refund into any of the 100+ cryptocurrencies Coinbase has selected for this purpose.
These 100+ options are more likely to include coins such as Ethereum, Bitcoin, and Bitcoin Cash rather than the more volatile coins that exist in the market.
If you decide to get your refund converted directly into crypto, then you won’t have to pay any trading fees whatsoever.
How to Get Your Own Crypto Tax Refund
Chances are that this sounds like a pretty sweet deal if you’re a big fan of digital currencies.
So how do you take part in this historic offer?
Well, it’s actually pretty simple.
Just make sure that you start your TurboTax refund from this page.
You can use the free tax refund service that TurboTax provides, so you won’t have to pay a cent to get your refund in crypto (as long as you’re only filing a W-2).
For the big ballers, there is a $25,000 maximum daily deposit. Something to keep in mind.
Once you finish your refund and it’s calculated, TurboTax will want your Coinbase account details to issue your refund. For more in-depth details on how to go about that, check out Coinbase’s blog article.
Do You Have to Pay Taxes on Your Crypto?
You’re excited to turn your tax refund into crypto—but what if you already own some cryptocurrencies? Maybe you have some Bitcoin, Ethereum, or Dogecoin.
Well, cryptocurrency is classified as intangible property by the IRS. This means that, for tax purposes, any profit you make from selling crypto needs to be reported. That profit will be subject to capital gains taxes.
And that’s just one example of how the IRS is taxing crypto. For two more specific scenarios, here’s what you need to know.
You Gifted Some Crypto
Here’s some great news—there’s a $15,000 threshold for gifting crypto.
This means that as long as you gift $14,999 or less, you don’t have to pay taxes on it. And only the gifter is liable for upfront taxes.
If you do gift $15,000 or more in crypto, then be sure to file IRS Form 709.
However, if the person who receives your crypto gift sells it for a capital gain, then they will be responsible for the amount they profited on.
You Cashed in on the NFT Hype
So you got in early on the NFT hype train and made a ton of money? Awesome!
Just make sure to be vigilant and stay ahead of your taxes. Trying to avoid paying the IRS their due can always lead to some ramifications.
For NFTs, you can treat them similarly to the previous example of gifting crypto.
That $15,000 threshold is your guiding hand. If you gifted more than $15,000 of NFTs, then make sure to report that. If you gifted $14,999 or less, you’re free and clear.
And if you sell an NFT and make a profit from it, according to the current rules you will need to pay capital gains taxes on the profit.
Something to remember for the future—buying an NFT can trigger a taxable event. Because of the crypto and cash trading that’s involved, you can experience capital gains or losses. The IRS will want to know about them.
Crypto is Becoming Mainstream
Widespread adoption of crypto means that more opportunities—like turning your tax refund into crypto, will be available to the public.
But it also means that crypto tax guidelines from the IRS will become more defined as time moves on.
So be sure to understand the tax rules on cryptocurrency and stay up to date with the changing environment!
Citations/Resources
The New York Times – TurboTax/tax refunds into crypto accounts
Engadget – Coinbase partners with TurboTax
Marca – Receive your tax refund in crypto
Marca – Will you ever pay your taxes in crypto?
Coinbase – Get Your Tax Refund In Crypto
CoinDesk – You May Owe Crypto Taxes
