Crypto Received as Payment or Income

If someone pays you in Bitcoin or any other cryptocurrency, the IRS treats it the same as cash — you owe income tax on the fair market value of the crypto at the time you received it.

This applies whether you're a freelancer getting paid in crypto, an employee receiving crypto as part of your compensation, or someone who sold goods or services and took digital currency instead of dollars.

That value becomes your cost basis in the crypto going forward, so if you later sell it for more than you received, you'll also owe capital gains tax on the additional appreciation.

If you're self-employed and regularly accept crypto as payment, you'll also owe self-employment tax on that income on top of regular income tax.

There's no way around the income tax by simply holding the crypto — the tax is triggered at the moment of receipt, regardless of whether you ever convert it to dollars.