CoinLedger recently published data on US states and their crypto tax policies, and the study named Florida as the most crypto-tax-friendly state in the US.
Florida’s no-state income tax makes it pretty good for crypto users. In addition, the state has several crypto-friendly policies, including a pilot program that allows firms to pay state fees in cryptocurrency.
Discover the Best US States for Crypto Taxation
CoinLedger achieved its ranking by calculating state income tax rates, state cryptocurrency regulations, and political sentiments about cryptocurrencies. Other crypto-tax-friendly US states include Texas and Wyoming. Both states have a 0% state income tax, pro-crypto laws, and permission for banks to act as cryptocurrency custodians.
Florida crowned as the most crypto-friendly state in the U.S., leading with no state income tax and supportive regulations. New York takes the unwanted title of the worst state, burdened by a 10.9% income tax and the BitLicense regime.
— BlockVoyager (@BlockVoyagerAIO) January 25, 2024
The report ranks Nevada as the fourth-most crypto-tax-friendly state. Like the others on this list, Nevada boasts no state income tax and has a history of enforcing crypto-friendly policies. Recall that in 2017, Nevada historically blocked local governments from taxing the use of blockchain.
Interestingly, the reports place the busy state of New York as the worst for crypto tax. New York has an income tax rate of 10.9%. In addition, the BitLicense regulatory framework doesn’t add to the state’s appeal for crypto users.
The Other Side of the Fence
Furthermore, the report ranks the state of California as the second worst. Cryptocurrency is subject to California’s sliding income tax system, which includes rates ranging from 1% to 13.3% if earned as income within the state. Reports suggest that California would implement regulations modeled on BitLicense’s system in New York.
NEW 🇺🇸 – Illinois is working towards a state cryptocurrency license like New York's BitLicense – Coindesk
— Bitcoin Archive (@BTC_Archive) February 27, 2023
Joining California and New York in terms of income tax rates, Hawaii, Massachusetts, and New Jersey had rates of 11%, 5%–9%, and 1.4%–10.75%, respectively. These states also have strict policies for crypto activities. For example, all exchanges operating in Hawaii must get a Money Transmitter License, which means that fiat reserves must back the value.
Commenting on the importance of knowing these tax systems, David Kemmerer, CEO of CoinLedger, said, “Some crypto investors will lose thousands of dollars of profits due to their state’s tax rates.” Knowing states with better tax climates could be a good way to profit more from crypto earnings.
