Also known as virtual or digital currency, is a type of decentralized currency which is not backed by any central or government authority. Because of this, the tax treatment of cryptocurrency can be complicated and may differ depending on the state that you are in.
The United States, the IRS has issued guidance that states that cryptocurrency is treated as property to the tax purpose. The result is that transactions involving cryptocurrency are subject to losses and capital gains similar to transactions involving other types of property.
For instance, if you purchase cryptocurrency and then sell it later for more money then you’ll be able to claim an income tax on the capital gain, which must be reported in your taxes. Conversely, if you sell the cryptocurrency at a lower price than you paid for it, you’ll have an income tax deduction that could be used to offset any other capital gains or up to $3000 in normal income.
In addition to capital gains and losses, you may also be subject to income tax on any cryptocurrency received in exchange for services or goods. This income is reported in your taxes and subject to tax rate the same as other types of income.
It’s important to keep in mind that exchanges and platforms where you buy, sell or trade cryptocurrency are required to declare certain transactions to IRS, so the IRS may have information about your cryptocurrency transactions, even when you don’t declare them on your tax return.
It is important to note that the information provided in this report is intended for informational only and should not be considered tax, legal and financial guidance. Every individual’s financial situation is individual, and you should consult with a qualified professional before making any decisions regarding your tax situation.
Furthermore, the laws and regulations regarding cryptocurrency taxation may change over time and may be different depending on where you are. It is your obligation to ensure that you are in compliance with the laws and regulations in force.
In essence the cryptocurrency is considered property tax-wise for tax purposes in the United States, and transactions that involve cryptocurrency could result in capital gains or losses as well as income tax. It is essential to speak with an experienced tax professional and keep current with laws and regulations to ensure that you are in compliance.
The information provided in this report is intended for informational purposes only and is not intended to be advice on tax, legal or financial advice. The information contained in this report may not be appropriate for all people or scenarios. Laws and rules surrounding cryptocurrency taxation may change over time and may differ based on the location you live in. You are responsible to make sure you comply with all relevant laws and rules. This report is not a substitute for expert legal or financial advice. You should seek advice from an experienced lawyer or financial advisor before making any decisions about your taxes.
The information contained in this document is for informational only and should not be considered financial advice. Each person’s financial situation is particular to them, and it is recommended that you seek advice from a professional prior to making any decision regarding your tax situation. The information contained within this document is based upon data available at the time of writing and may be subject to change in the near future. There is no guarantee as to the quality or reliability of information is made. The risk of investing in cryptocurrency is high and you should speak with a financial advisor before investing. Past performance of cryptocurrency does not guarantee the future outcomes. The information is not intended to be used as a general reference for investing or to provide any specific investment advice or recommendations. It does not make any implied or express recommendations concerning the way in which an individual’s account should or would be managed, since the proper investment decisions are based on the individual’s specific investment objectives.