How the Crypto Income Tax Calculator works

The formula

Step by step

1. Rewards are valued at their fair market value on the day dominion and control is gained — the point you could actually transfer or sell them, which for locked rewards can be later than the day they appear.
2. That value is STACKED on top of other income and the tax is the difference it makes. Applying a rate to the rewards in isolation would overstate the bill for a low earner and understate it for a high one.
3. Self-employment tax is added only when the activity is a trade or business — mining usually, passive staking usually not. It is a choice in the tool rather than an assumption, because the distinction is facts-and-circumstances rather than a line in the code.
4. The declared value becomes the COST BASIS. A later sale is taxed on the change since receipt, not on the full proceeds — which is why this is two taxable events on two different amounts.
5. The price-change input shows what the position is worth now against a tax bill that was fixed on the day it arrived. That gap is the exposure people underestimate.

Assumptions & limitations

• Federal only. Several states tax this income too, and none of that is modelled.
• One treatment is applied across staking, mining, airdrops and lending interest. Rev. Rul. 2023-14 addresses staking specifically; guidance on airdrops and mining is thinner, and the page says so rather than implying a precision the guidance does not have.
• Whether an activity rises to a trade or business is a facts-and-circumstances question this calculator cannot answer for you.
• Assumes cash-method accounting, which is what almost all individuals use.
• The resulting capital loss when a token falls is NOT netted here — it offsets capital gains plus $3,000 of ordinary income a year, which the tax-loss harvesting calculator handles.