Monday, November 23, 2020

Cryptocurrency and Taxes: What Do You Need To Know

Must Read

Is the Evergreen Formula a scam?

No, it’s now no longer a scam. You’re likely skeptical like I became once I first signed up. But I...

Hear Music With Masstamilan

Tamil melodies are engaging and inspiring, an extreme wellspring of amusement. The early types of these melodies grasped the...

What Is Murivenna Used For?

Murivenna is a classical ayurvedic oil that is extremely beneficial for its anti-inflammatory, analgesic, and pain-relieving properties which confers...

If you have been using cryptocurrency, then you must be aware of its associated taxes. However, with all opportunities and excitement surrounding the crypto world, people often forget about crypto taxes. Every crypto transaction, be it altcoin or bitcoin is included under tax slab.

As per the Internal Revenue Service (IRS) enforcement selling cryptocurrency is subject to taxation. While considering the seriousness, the IRS is very strict about implementing the crypto taxes. This is because many of the crypto users have been evading tax payments by not reporting their transactions. Only a few several hundred people have come forward and are sincerely paying taxes for their crypto gains.

Unfortunately, regarding cryptocurrency taxation, IRS has not yet released clear statements. But one thing is evident that IRS is treating cryptos as property for tax purposes. Since cryptocurrency trading is an investment activity, people have to abide by rules to disclose their capital gains and losses. Therefore, according to IRS rules, spending, selling or even exchanging cryptos are subject to capital gains and should be liable for taxation. Nevertheless, receiving cryptocurrency as compensation, gift or by any other means would be considered as an ordinary income.

Now let’s have a look at different crypto transactions and their related tax implications:

 

Trading cryptocurrencies: Cryptocurrency trading generates capital gains as well as losses. If you made a gain, you would need to pay taxes. If incurred losses, then you can get a rebate in tax payment.

Exchanging one token for another: If you use anyone crypto coin to purchase another crypto coin, then it will either generate capital gains or loss. Thus, the exchange of one token for another, like using ETH to buy altcoin is likely to attract tax charges.

Receiving payments in crypto: If you receive payment in cryptocurrency in exchange for product or services, or as a salary, then it will be considered as ordinary income and will be treated based on the fair market value of the coin at the time of receiving it.

 

Spending crypto: Spending your crypto coins is also liable to generate capital gains or losses which can be either short-term or long term depending on the holding period. For instance, suppose you acquire a coin for $200. If the coin ends up being worth $500 and you purchase a $500 gift card, then there exists a $500 taxable gain.

Converting a cryptocurrency: Conversion of cryptocurrency to US dollars or any other currency is a taxable event. Since the conversion involves gain, it is treated as sold, thereby generating profit.

 

Airdrops:  A crypto airdrop is regarded as ordinary income on the day of the airdrop. The value of the coin at the time of event becomes basis, and there is a capital gain with it.

Mining coins: Mining of crypto coins is also a taxable event. It is considered as an ordinary income equal to the fair market value of the coin on the day it was mined.

Everything discussed here regarding taxation applies to all virtual currencies. Also, remember that initial coin offering does not fall under the IRS’s tax-free criteria. So, next time when you head to INR to BTC exchange or to buy bitcoin in India take a follow up these tax regulations.

- Advertisement -
- Advertisement -

Latest News

Is the Evergreen Formula a scam?

No, it’s now no longer a scam. You’re likely skeptical like I became once I first signed up. But I...

Hear Music With Masstamilan

Tamil melodies are engaging and inspiring, an extreme wellspring of amusement. The early types of these melodies grasped the rich creations from Sangam Literature...

What Is Murivenna Used For?

Murivenna is a classical ayurvedic oil that is extremely beneficial for its anti-inflammatory, analgesic, and pain-relieving properties which confers and absolute remedy for the...

Speak to the Most Outstanding Lawyer You Deserve Today

Nowadays, most of us are not just depending on the ordinary and average things alone because we are now choosing an outstanding state of...

5 Steps To Take if You’ve Been the Victim of Workplace Discrimination

All you want to do at your job is earn a decent living while building your career. Sometimes you get the impression that won’t...
- Advertisement -

More Articles Like This

- Advertisement -