Many financial institutions offer free money for consumers. For example, credit card companies offer cash back on transactions and bank accounts offer interest. Now, you might be able to get this free cash offered in cryptocurrency. Using these methods for free crypto might not be a challenge for those who already have a crypto investment portfolio, but there are some additional responsibilities when tax season arrives. While some free crypto, like crypto credit card rewards, are only taxed on capital gains when you cash out, other crypto might be considered taxable income when you get it, and you must report that to the IRS. Here’s what NextAdvisor’s Ryan Haar reports are ways to earn free crypto:
1. Shopping Rewards
Lolli is a Google Chrome or Firefox browser extension. Much like traditional cash shopping apps like Honey or Rakuten, Lolli offers bitcoin back on purchases made through their retail partners. Lolli gives you Bitcoin when you use regular money to make purchases online. The Bitcoin rewards are then collected in your Lolli account, from which you can make a transfer to your crypto wallet or exchange account. Lolli has many retail partners, including Nike and Sephora, with a range of 1%-30% bitcoin back depending on your purchase.
2. Credit Cards
Cryptocurrency credit cards work the same as traditional credit cards, but instead of getting cash back with purchases, you receive cryptocurrency. These types of cards can help bolster your crypto portfolio without much additional work. Some crypto exchanges, like Gemini, have offered their intentions for cryptocurrency reward credit cards. Fintech companies, like Blockfi and Upgrade, have done the same. Each card has a different plan and various reward rates. For example, BlockFi earns bitcoin rewards at a rate of 1.5% on every purchase made, after earning 3.5% for the first 90 days.
One thing to note about credit card crypto rewards: the rewards from these cards are only valuable if you do not have a high interest rate or balance. If you choose to use this method, only charge what you can afford to pay off to avoid carrying a balance on the credit card.
3. Exchange Sign-Ups and Referral Bonuses
There are some cryptocurrency exchange services that offer sign-up bonuses for using their services. Be sure to pay attention to terms of service when signing up. If you already have an established account, sign up bonuses are not often profitable enough to warrant signing up for a new exchange. However, for beginners, this might be a good opportunity to receive a sign-up bonus or referral payout.
4. Coinbase Earn
Coinbase is a popular cryptocurrency exchange that offers opportunities for free crypto by using their Learn hub. This is a platform where you can earn crypto by watching Coinbase’s videos and taking quizzes. The content on the Learn hub is typically about altcoin like GRT and BOND, so those coins are what you’ll receive your payment in. However, you are able to convert these altcoins to Bitcoin or Ethereum. But take care–any crypto-to-crypto transaction is taxable. Be sure to keep track of these transactions. Also, track the price value of all earning from Coinbase Earn and report them on your federal tax return. $600 or more earned through the program will earn you a Form 1099-MISC from Coinbase, which you should use to report your earnings. There are a few conditions that apply–you must have a funded Coinbase account, live in an eligible country, and verify your personal information to begin earning with Coinbase Earn.
5. Interest on Bitcoin
Some crypto exchanges allow you to earn interest on your holdings, BlockFi Interest Account accrues interest up to 7.5% if you lend your crypto to institutional borrowers. If you decide to lend your crypto, be sure to read the terms and conditions carefully. Don’t lend more than you can afford to lose as there is more risk.
Staking is another method that can help you earn interest. Staking means that you leave crypto in your wallet to earn rewards or interest. This helps maintain the blockchain network. There are only certain types of coins that you can stake, meaning that you might have to buy into more risky altcoins to come out ahead.
Interest earned and earnings from staking are both taxable, and you must report it as income. You’ll need to track the cost basis of your earnings to report on your yearly tax return.
6. Airdrops
Airdrops carry the most inherent risk for obtaining free crypto. For most, this method is not necessarily worth the risk. Airdrops are performed when developers want to gain attention for their new cryptocurrencies. Airdrop projects are often advertised online on company websites and bitcoin news sites. If you qualify for the project, the developer will send the specified amount straight to your wallet.
Exercise caution in new cryptocurrency projects. There are often fake airdrops and initial coin offerings (ICOs) used by hackers. If the airdrop project is real, they are still not often lucrative in investment store of value. Any crypto you earn through airdrops is also taxable income. You are responsible for reporting the fair market value on the date it was recorded on the distributed ledger, according to the IRS.
All in All
There are many ways to receive free crypto in the new and growing landscape of cryptocurrency. However, be careful: this “free” money is often taxable and needs to be reported. Invest with the mindset that you might lose, and never invest more than you’re comfortable with.
Source : bsctimes
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