Cryptocurrency, also called digital or virtual currency, is a form of currency that is decentralized and not supported by any central or government authority. Due to this, the taxation of cryptocurrency can be complex and may differ depending on the state where you live.
Within the United States, the IRS has issued a guidance document that states that cryptocurrency is considered property to the tax purpose. The result is that transactions involving crypto are subject to losses and capital gains as are transactions that involve other forms of property.
If, for instance, you buy cryptocurrency, and 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 an amount lower than the price you paid for it you’ll have a capital loss that can serve as a way to reduce any other capital gains or as much as $3,000 of ordinary income.
In addition to capital losses and gains, you may also be taxed for any cryptocurrency that you use as payment for goods or services. The earnings is reported on your tax return and is subject to the same tax rates as other types of income.
It’s important to keep in mind that the platforms and exchanges that you buy, sell, or trade cryptocurrency must submit certain transactions to the IRS, so the IRS might have information on your cryptocurrency transactions even in the event that you don’t record the transactions on your tax return.
It is important to understand that the information in this report is for informational purposes only . It is not tax, legal, or advice on financial matters. Each individual’s financial situation will be individual, and you should consult a qualified tax professional prior to making any decision about taxes.
Furthermore, the laws and regulations pertaining to cryptocurrency taxes can change, and could be different depending on where you are. It is your responsibility to ensure compliance with all applicable laws and regulations.
In short the cryptocurrency is considered property for tax purposes within the United States, and transactions involving cryptocurrency may result in the loss or gain of capital as well as income tax. It is important to consult with an experienced tax professional and keep current with rules 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 legal, financial or tax advice. The information contained in this report may not be appropriate for all people or situations. The laws and regulations surrounding cryptocurrency taxation are subject to change and can vary depending on your location. Your responsibility is to ensure that you are in compliance with the relevant laws and rules. This report is not a substitute for professional legal or financial advice. You should consult with an experienced attorney or financial advisor prior to making any decision regarding your tax situation.
The information contained in this report is intended for informational purposes only and is not meant to be considered as financial advice. Each person’s financial situation is individual, and you should consult with a qualified professional prior to making any decision regarding taxes. The information on this page is based on data that were available at the time of the report’s creation and could change in the future. No guarantee of the quality or reliability of information provided. It is risky to invest in cryptocurrency and you should seek advice from an advisor in the field of finance prior to investing. The performance of cryptocurrency in the past is not indicative of the future outcomes. The information is not intended to serve as a general reference for investing or as a source of any specific investment recommendations and does not offer any implicit or explicit recommendations about the way in which an individual’s accounts should or should be handled. The suitable investment decisions are contingent upon the particular investment goals of the person.