Do You Need to Pay Taxes on Meme Coins? Insights from a Crypto Tax Professional

While many crypto investors don’t give much attention to meme coins, those who choose to invest in them must realize that meme coin tax consequences are no laughing matter. Much like their much more serious counterparts, meme coins can be bought, sold, and transferred, meaning they too are subject to tax. In this post, Onchain Accounting, as a crypto tax professional, will tell you everything you need to know about paying taxes on meme coins.

What are memecoins?

At this point, we’re confident that everyone knows what a memecoin is. But just in case, a memecoin is a cryptocurrency that is inspired by internet jokes, viral trends, or pop culture. These cryptocurrencies primarily rely on social media hype and community sentiment to maintain value rather than having a specific utility or underlying asset. Examples of classic meme coins include Dogecoin (Shiba Inu dog) and PEPE coin (Pepe the frog).

How are cryptocurrencies taxed?

In the United States, cryptocurrencies are considered digital assets and are treated similarly to stocks, bonds, and other capital assets. Taxes on cryptocurrencies and other crypto assets depend on how they are used. The transactions where crypto assets can be taxed are known as taxable events, and they include

• Selling crypto for USD or any other fiat currency
• Trading or converting one crypto to another
• Spending crypto on goods and services
• Getting paid in crypto
• Getting crypto in exchange for goods and services
• Mining cryptocurrency
• Earning other income and stacking rewards

How do taxes apply to memecoins?

The taxes that can apply to all manner of cryptocurrencies are twofold—income tax and capital gains tax.

Income tax will apply to meme coins when you get paid in meme coins, get them through airdrops, or any other manner that signifies an income. For example, if you receive $500 worth of DOGE coin in an airdrop, your income would be $500, and you will have to pay the relevant percentage as income tax.

On the other hand, memecoins will be subject to capital gains tax, which can either be short-term or long-term capital gains tax, when you sell or transfer the memecoin and achieve a capital gain. For example, if you bought coin A for $100 and later sold it for $150, your capital gain would be $50.

If the sale is made within a year of purchasing the coin, short-term capital gains tax will apply. If the sale took place after the coin was held for more than a year, then long-term capital gains tax will apply. In the United States, short-term capital gains tax is much higher than long-term capital gains tax.

Conclusion

While meme coins are fun, fast-moving digital assets, the IRS views them just like any other cryptocurrency—fully taxable. Whatever your meme coin may be, if you receive an income or capital gain, it creates a tax obligation that you must address. We understand that keeping track of these fast-moving assets can be difficult, and that’s where Onchain Accounting can make a difference.

We have been rendering services as an experienced cryptocurrency tax accountant for almost a decade, and we are ready to help you create accurate and detailed records, minimize your tax burdens, and help you stay legally compliant. No matter how chaotic memecoins can be, taxes won’t go away—let Onchain Accounting help you stay ahead, one memecoin at a time.