Florida Tops, New York Bottoms in U.S. Crypto Tax Rankings: CoinLedger Report

In a recent study by CoinLedger, Florida has been crowned the “best state” for cryptocurrency taxes in the United States, while New York finds itself at the opposite end of the spectrum, named the worst. The study, which was released on January 22, takes into account various factors such as state income tax rates, regulatory policies on cryptocurrency, and leadership statements regarding the digital currency.

Florida’s top ranking is attributed to its absence of state income tax and its progressive stance on cryptocurrency. The state has launched a pilot program allowing businesses to pay state fees using cryptocurrency, further solidifying its position as a crypto-friendly state. Texas and Wyoming, both offering a 0% state income tax and supportive policies for cryptocurrency, closely follow Florida in the rankings. These states also allow banks to act as crypto custodians, enhancing their appeal to crypto investors and businesses.

Nevada ranks fourth, thanks to its lack of state income tax on crypto earnings and its pioneering move in 2017 to prohibit local governments from taxing blockchain usage. Arizona, with a flat tax rate of 2.5% on crypto income and its early clarification that airdrops are state-tax free, rounds out the top five states.

David Kemmerer, CEO of CoinLedger, emphasized the importance of understanding local tax policies for crypto investors. He pointed out that investors’ profits could be significantly impacted by their state’s tax rates, leading to potential losses of thousands of dollars.

Contrastingly, New York has been deemed the least favorable state for cryptocurrency taxes, primarily due to its high income tax rate of 10.9% and the stringent BitLicense regulatory framework. California follows, with its variable income tax rates ranging from 1% to 13.3%, and plans to possibly adopt a regulatory approach similar to New York’s BitLicense.

Other states like Hawaii, Massachusetts, and New Jersey also feature less favorable conditions for crypto taxation, with various income tax rates and additional licensing requirements for exchanges in Hawaii.

Despite these state-level variations, the Internal Revenue Service (IRS) of the U.S. showed some leniency towards crypto taxation on January 17. The IRS has decided to hold off on enforcing the reporting of cryptocurrency transactions over $10,000 until a more refined tax framework is established, providing temporary relief to crypto businesses.