Cryptocurrency Taxes in Illinois: What You Need to Know
If you own, trade, or mine cryptocurrency in Illinois, understanding your tax obligations is critical. The Illinois Department of Revenue (IDOR) treats crypto as taxable property, meaning transactions can trigger federal and state tax liabilities. This guide breaks down how crypto taxes work in Illinois, reporting requirements, and strategies to stay compliant.
Key Illinois Crypto Tax Rules
- Crypto Is Taxable Property: Like the IRS, Illinois taxes crypto as property. Selling, trading, or spending it may generate capital gains or losses.
- Taxable Events Include:
- Selling crypto for fiat (e.g., USD)
- Trading one crypto for another
- Using crypto to buy goods/services
- Earning crypto via mining, staking, or rewards
- Income Tax Rate: Illinois applies a flat 4.95% income tax rate to crypto gains and earnings.
- Federal & State Reporting: Report transactions first to the IRS (Form 8949/Schedule D), then to Illinois via Schedule IL-1040.
How to Report Crypto Taxes in Illinois
- Track All Transactions: Use tools like CoinTracker or Koinly to log dates, amounts, and values in USD.
- Calculate Gains/Losses: Subtract the cost basis (purchase price + fees) from the disposal amount. Short-term gains (held under 1 year) are taxed at ordinary rates; long-term gains have lower federal rates (0%–20%).
- File Federal Forms: Report gains/losses on IRS Form 8949 and summarize on Schedule D.
- File Illinois Taxes: Transfer federal taxable income to Schedule IL-1040. Illinois taxes crypto gains as regular income.
Common Crypto Tax Mistakes to Avoid
- Failing to report small transactions or “forgotten” wallets.
- Mistaking crypto-to-crypto trades as non-taxable (they are taxable events).
- Overlooking state taxes after filing federal returns.
- Not keeping records for at least 3–4 years.
Illinois Crypto Tax FAQ
1. Is cryptocurrency taxed in Illinois?
Yes. Illinois taxes crypto gains and income at 4.95%, aligning with federal rules.
2. What if I didn’t report crypto taxes in previous years?
File amended returns using Form IL-1040-X to avoid penalties. The IDOR may impose fines or interest for late payments.
3. How is mined crypto taxed?
Mined crypto is taxed as ordinary income at its fair market value upon receipt. Selling it later may also trigger capital gains tax.
4. Does Illinois tax NFTs?
Yes. NFTs are treated like other crypto assets—taxed as property upon sale or trade.
5. Are there penalties for not reporting crypto?
Yes. Penalties include fines up to $2,500 per violation, interest on unpaid taxes, and potential audits.
6. Does Illinois offer crypto tax exemptions?
No. Unlike some states, Illinois does not exempt crypto from income or capital gains taxes.
Stay Compliant with Illinois Crypto Taxes
Use tax software to automate calculations, and consult a crypto-savvy CPA if you have complex transactions. Proactive reporting helps avoid audits and penalties while maximizing deductions.
