November 2025- Q&A, Virtual Currency

Q&A with virtual currency

Q1: Do I have income if I provide someone with a service and that person pays me with virtual currency?
A1. Yes. When you receive property, including virtual currency, in exchange for performing services, whether or not you perform the services as an employee, you recognize ordinary income. For more information on compensation for services, see Publication 525, Taxable and Nontaxable Income. https://www.irs.gov/forms-pubs/about-publication-525

Q2: Does virtual currency received by an independent contractor for performing services constitute self-employment income?
A2. Yes. Generally, self-employment income includes all gross income derived by an individual from any trade or business carried on by the individual as other than an employee. Consequently, the fair market value of virtual currency received for services performed as an independent contractor, measured in U.S. dollars as of the date of receipt, constitutes self-employment income and is subject to the self-employment tax.

Q3: If I donate virtual currency to a charity, will I have to recognize income, gain or loss?
A3: If you donate virtual currency to a charitable organization described in Internal Revenue Code Section 170(c), you will not recognize income, gain, or loss from the donation. For more information on charitable contributions, see Publication 526, Charitable Contributions. https://www.irs.gov/forms-pubs/about-publication-526

This newsletter contains general information for taxpayers and should not be relied upon as the only source of authority.  Taxpayers should seek professional tax advice for their specific tax situation and for more information.