1/8 CRYPTO TAXES—DISTILLED
This is the best info I've found about nodes & US taxation so far. It's a synopsis of a Nov. 2021 Q&A with @CryptoTaxGirl
If any US-based CPAs on #taxtwitter spot errors, PLEASE tell me.
Full thread is here:
Please RT! 🧵👇
This is the best info I've found about nodes & US taxation so far. It's a synopsis of a Nov. 2021 Q&A with @CryptoTaxGirl
If any US-based CPAs on #taxtwitter spot errors, PLEASE tell me.
Full thread is here:
https://twitter.com/CryptoTaxGirl/status/1458158622765166598
Please RT! 🧵👇
2/8 The IRS has offered no clear guidance on crypto taxation since 2014... Nodes, DAOs & NFTs are less than a year old, so the crypto space needs clarity on how to list income & expenses.
Until then, we must rely on CPAs to do their best to interpret the IRS's intent.
Until then, we must rely on CPAs to do their best to interpret the IRS's intent.
3/8 BIZ EXPENSES MEANS BIZ ENTITES
@CryptoTaxGirl says that in order to claim deductible expenses on a Schedule C form, you'd need to be a legit business. (Did I get that right?)
Depending on how much you make in a year, this should be an LLC or S-Corp (1 person C Corp).
@CryptoTaxGirl says that in order to claim deductible expenses on a Schedule C form, you'd need to be a legit business. (Did I get that right?)
Depending on how much you make in a year, this should be an LLC or S-Corp (1 person C Corp).
4/8 INCOME & EXPENSES
1) Claiming node rewards are subject to Self-Employment Income tax (list it on an LLC's Schedule C).
2) Selling claimed rewards are subject to cap gains tax.
3) Deductible expenses:
• node maintenance fees
• gas fees
• node creation costs (SE expense)
1) Claiming node rewards are subject to Self-Employment Income tax (list it on an LLC's Schedule C).
2) Selling claimed rewards are subject to cap gains tax.
3) Deductible expenses:
• node maintenance fees
• gas fees
• node creation costs (SE expense)
5/8 TAXES ON GAINS ONLY
1) Claim 10 STRONG <— SE income
2) Spend 10 STRONG for a new node <— deductible SE expense
3) 10 STRONG income (from claiming) minus 10 STRONG (from node creation, a SE expense) = $0 taxable income
(BUT cap gains tax added if STRONG changes in value)
1) Claim 10 STRONG <— SE income
2) Spend 10 STRONG for a new node <— deductible SE expense
3) 10 STRONG income (from claiming) minus 10 STRONG (from node creation, a SE expense) = $0 taxable income
(BUT cap gains tax added if STRONG changes in value)
6/8 LLC or S-CORP?
You must be a biz to claim biz expenses on Sch C—how much did you make?
< 60K? File as LLC & deduct SE expenses
> 60K? Convert LLC to S-Corp to reduce SE income
S-Corps can’t be backdated—node income is only deductible as biz income *after* S-Corp's created.
You must be a biz to claim biz expenses on Sch C—how much did you make?
< 60K? File as LLC & deduct SE expenses
> 60K? Convert LLC to S-Corp to reduce SE income
S-Corps can’t be backdated—node income is only deductible as biz income *after* S-Corp's created.
7/8 SHOULD COMPOUNDED TOKENS BE TAXED?
If compounded tokens *never* hit your wallet, are they taxable? CPAs disagree. Two views:
1) Did you have control over funds? (claim)
2) Did tokens ever hit your wallet? (don't claim)
(I'd think #2 because it's a tax-neutral event.)
If compounded tokens *never* hit your wallet, are they taxable? CPAs disagree. Two views:
1) Did you have control over funds? (claim)
2) Did tokens ever hit your wallet? (don't claim)
(I'd think #2 because it's a tax-neutral event.)
8/8 HOW ARE GIFTED NODES TAXED?
Gift recipients inherit your cost basis & holding period for the time when nodes were created.
== end of synopsis ==
N.B. No info here about nodes-as-NFTs, which might be treated differently.
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Gift recipients inherit your cost basis & holding period for the time when nodes were created.
== end of synopsis ==
N.B. No info here about nodes-as-NFTs, which might be treated differently.
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