Tax is complicated – let alone crypto tax. But for crypto newcomers, it’s vital to understand that cryptocurrency is taxed, including when you earn small amounts of crypto through “Learn and Earn” programs.
Wrapping your head around new terminology, jargon, and concepts is a minefield. Fortunately for newbies, Learn and Earn programs are a great way to get up to speed with the complexities of crypto.
Platforms such as Binance, Coinbase and CoinMarketCap all have Learn to Earn programs that reward new users. As you progress through various modules, a small number of tokens (usually $1-$5) is rewarded to you.
Receiving free money might seem too good to be true. But Learn to Earn programs are a way you can receive free tokens in exchange for a small amount of your time.
Dedicated modules will teach you about their unique point of difference within the ever-growing cryptocurrency markets, bringing more users to the exchange while distributing ownership of the project’s tokens.
But with all good things, there’s usually a catch. In this case, tax offices worldwide may view any tokens received via “Learn to Earn” programs as income. So if you’ve completed some modules and received any free tokens over the past year, you might be in the crosshairs this tax season.
Fear not! If you’ve made some additional pocket money from Coinbase or Binance – crypto tax platform Koinly is here to explain.
How is “Learn and Earn” taxed?
Learn and Earn is still a relatively new concept – so many tax offices still haven’t released guidance on them, but this doesn’t mean you won’t be taxed.
Based on the latest guidance, you’ll have to pay Income Tax if you’ve earned any income from crypto (such as earning coins, tokens, or interest). As many tax offices view earning airdrops in exchange for social media posts or engagement as income, Learn and Earn programs will likely be viewed under the same interpretation.
The amount you’ll earn from Learn and Earn programs is fairly low; however, if you complete different modules across multiple exchanges, they can start adding up.
Many countries have an allowance for additional income – so you’ll be able to earn a few hundred dollars in income on top of your regular salary before it is taxed.
For example, in the UK, you can earn £1,000 in additional income tax-free, so you wouldn’t need to report Learn and Earn income to HMRC if this was your only additional income. The ATO states that the first $18,200 of income is tax-free in Australia.
However, in the US, the IRS has no such ruling, so you’ll likely have to pay tax on the small amount of Learn and Earn income you may have generated.
So while you may not need to report your Learn and Earn crypto income in some countries, if you have other crypto investments from which you’re earning income, you must report these to your tax office and pay the relevant taxes.
Similarly, if you later spend, sell, swap or gift your Learn and Earn crypto – any profits will be subject to Capital Gains Tax. This is based on the difference in value between when you acquired the crypto and when you disposed of it.
How can Koinly help with crypto income taxes?
Koinly can help you calculate your crypto income and report it to your local tax office.
Whenever you receive crypto – Koinly calculates the fair market value of your crypto in your chosen currency and on the day you receive it. This lets you keep track of your total earnings throughout the financial year.
About Koinly: Whether it’s Crypto, DeFi or NFTs, Koinly saves you valuable time by reconciling your holdings to generate a compliant tax report in under 20 minutes.
Sign up today and see how much you owe!
https://koinly.io/
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Disclaimer: Koinly is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how this information relates to your unique circumstances.
