The state of Florida has been named the “best state” for cryptocurrency taxes in the United States, while the state of New York was named the worst state according to data from CoinLedger.
In a study released on Jan. 22, data revealed that due to no state income tax and crypto-friendly regulatory policies, which include a pilot program giving businesses the option to pay state fees in crypto, Florida came in as the best state of crypto taxes.
The study concluded its results by calculating state income tax rates, state regulatory policy on cryptocurrency and statements from leadership about cryptocurrency. Florida was followed by Texas and Wyoming with 0% state income tax and crypto-friendly policies and allowances for banks to serve as crypto custodians.
Nevada was named the 4th best state for crypto tax, also with no state income tax on crypto and was the first to ban local governments from taxing the usage of blockchain back in 2017. Arizona came in 5th place with a flat tax of 2.5% on crypto taken as income and was one of the earliest states to clarify that airdrops are tax-free on a state level.
David Kemmerer, the CEO of CoinLedger, highlighted that it’s "crucial" for investors to understand local tax policies saying, “some crypto investors will lose thousands of dollars of profits due to their state’s tax rates.”
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On the other end of the scale, New York was named the worst state for cryptocurrency tax with a 10.9% income tax rate, with the cherry on top of having the BitLicense regulatory regime.
California came in as the second worst. If crypto is earned as income in the state, it is taxable on California’s sliding income tax system that has rates ranging from 1% to 13.3%. It’s also considering creating regulatory policies based on New York’s BitLicense regime.
Hawaii, Massachusetts and New Jersey followed California and New York, with income taxes at 11%, 5-9% and 1.4% to 10.75% respectively. In addition, Hawaii requires all exchanges in the state to acquire a Money Transmitter Licence, which entails fiat reserves backing the value.
Nonetheless, on Jan. 17 the International Revenue Service (IRS), which is in charge of taxation in the U.S. stepped back on some of its crypto tax rules.
It now intends to exempt businesses from reporting cryptocurrency transactions above $10,000 until the tax agency releases an updated framework.
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