Taxation of Crypto Currency Trading
Taxable Events:
-Selling crypto for fiat
-Buying one crypto with another crypto
-Spending crypto
-Earning crypto
Non-Taxable Events:
-Buying crypto with fiat
-Transferring crypto between your wallets
***Thread***
Taxable Events:
-Selling crypto for fiat
-Buying one crypto with another crypto
-Spending crypto
-Earning crypto
Non-Taxable Events:
-Buying crypto with fiat
-Transferring crypto between your wallets
***Thread***
Taxable Events
The IRS views cryptocurrency as property so it's taxation is more like when trading as stock than a currency:
-Gains or loss are calculated on transaction value vs. cost basis.
-Coin held for >1 year is benefited by long-term capital gain rates.
The IRS views cryptocurrency as property so it's taxation is more like when trading as stock than a currency:
-Gains or loss are calculated on transaction value vs. cost basis.
-Coin held for >1 year is benefited by long-term capital gain rates.
Considerations
Gains need to be calculated when coin is sold for fiat, exchanged for a different coin, or used to make a purchase.
It's very hard to assign basis to a tranche of satoshis you are using to buy a cup of coffee.
If you are HODL, this doesn't matter for now.
Gains need to be calculated when coin is sold for fiat, exchanged for a different coin, or used to make a purchase.
It's very hard to assign basis to a tranche of satoshis you are using to buy a cup of coffee.
If you are HODL, this doesn't matter for now.
Trading is probably easier to track than spending, esp. if trading in blocks, but still difficult.
There is some good software out there that sync with the major exchanges when it comes to tax time or you can ask your tax advisor.
I'll do another thread on this specifically.
There is some good software out there that sync with the major exchanges when it comes to tax time or you can ask your tax advisor.
I'll do another thread on this specifically.
Why is purchasing something with coin a taxable event?
It is treated as property, subject to capital gains so if you are holding a coin that cost $100 and it's now worth $200 and you spend it on something that is $200, it's viewed as if you sold it and then made the purchase.
It is treated as property, subject to capital gains so if you are holding a coin that cost $100 and it's now worth $200 and you spend it on something that is $200, it's viewed as if you sold it and then made the purchase.
This problem would be minimized on foreign currency transactions where there is a $200, per transaction exception.
This exception does not exist for cryptocurrency.
This exception does not exist for cryptocurrency.
What can I do with my crypto that doesn't cause a tax?
You can buy it with fiat and you can transfer it between wallets you own.
Everything else is generally like selling a stock and has tax consequences.
You can buy it with fiat and you can transfer it between wallets you own.
Everything else is generally like selling a stock and has tax consequences.
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