Owning crypto and selling crypto in Pennsylvania are two different things. When it comes to the former, an individual is under no obligation to report the said crypto to the IRS, while the latter event will require a different approach.

Many US residents are currently using the HODL approach when buying and storing crypto, which is otherwise known as ‘hold on for dear life.’ With HODLing, all taxpayers are off the hook when it comes to reporting their crypto holdings, meaning they can store digital assets for years – as long as they don’t make a transaction.

The minute there’s a digital asset transaction, Pennsylvania’s residents must report it, regardless of the outcome. Whether a person opts for crypto leverage trading and makes a huge gain or sells crypto, which results in a loss, they are obligated to pay a capital gains tax on it.

The laws in Pennsylvania regarding cryptocurrency trading and usage are very clear. They, along with all other digital assets, are classified as property. While the precise amount of taxes paid for crypto transactions might differ based on the state, people living in Pennsylvania will need to pay a flat rate of 3.07%.

The first step is paying attention to the virtual currency question that you will find at the top of the Form 1040 tax return. You’ll be asked to check either the yes or no box, depending on whether you’ve had any crypto transactions within the year.

This is when keeping a close track of your crypto transactions comes into play, as you’ll be asked to provide a chronological list of transactions across your wallets. Each crypto transaction should include all the necessary details, including the cost basis, sale price, and the amount you’ve lost or gained from it. These pieces of information will go on the IRS Form 8949.

Finally, the overall result from your crypto transactions is carried on to Form 1040 Schedule D, after which a person can finish doing the rest of their taxes to see whether the fiscal year will provide them with a hefty return.

Apart from being obligated to pay a capital gains tax for crypto transactions in Pennsylvania at a 3.07% rate, you are also required to pay a crypto tax at the federal level. Federal-level taxes are regulated by the IRS, which gives guidelines on how much you can expect to pay.

All Pennsylvania residents have certain tax obligations, as well as potential deductions and reliefs. Unless you find joy in doing your own taxes, it’s always best to consult a professional who will give you a full rundown of your obligations and deductions, at the very least. They’ll help you understand your obligations as a taxpayer, as well as make sure that your taxes are done correctly and in due time.

This, unfortunately, won’t be the end of your expenses when buying crypto from Pennsylvania. The state’s residents also encounter a plethora of fees that depend mostly on two things: the platform used and the type of transaction.

Most cryptocurrency platforms and brokers charge different fees for their services, and they can vary significantly in amount. Some platforms offer tiered structures, where people with VIP accounts face lower fees. Lower fees are also characteristic of larger trading volumes, making it look like it pays off to risk more.

Transaction fees are another common example of additional costs Pennsylvania’s residents will face. They are paid to the blockchain network when processing a transaction, and they are usually paid using cryptocurrency. Again, the amount of this fee depends on different factors, like network congestion and the complexity of the transaction.

Ultimately, Pennsylvania’s residents have to account for different additional costs, which range from payment processing fees to withdrawal fees. The former is usually charged as a flat percentage, depending on which payment method and processor a person uses. Whether you use a debit or credit card, a digital wallet, or another method, the fee will be deducted from the total transaction amount.

As for withdrawal fees, they are usually present when a person withdraws funds from their exchange wallet and transfers them to a personal one.

Of course, other fees, such as the ones paid for custodial services and account maintenance, are also possible, but they exist for Pennsylvania’s residents making specific types of transactions. If not sure whether the transaction you are about to make falls under the ‘special’ category, it’s always best to consult a professional.