The term “cryptocurrency,” also called digital or virtual currencyis one kind of decentralized currency which is not backed by any central or government authority. Because of this, the tax treatment of cryptocurrency is complex and may differ depending on the country in which you reside.
The United States, the IRS has issued a guidance document that states that cryptocurrency is treated as property for tax purposes. That means that transactions that involve cryptocurrency are subject to losses and capital gains as are transactions that involve other forms of property.
For example, if you buy cryptocurrency, and sell it later for an amount that is higher and you receive an income tax on the capital gain, which must be declared on your tax return. If you sell the cryptocurrency for less than what you paid for it, you’ll be able to claim a capital loss that can be used to offset other capital gains, or up to $3,000 of ordinary income.
In addition to capital losses and gains, you may also be subject to income tax on any cryptocurrency received in exchange for goods or services. This income must be reported in your taxes and subject to tax rate the same as other types of income.
It’s important to keep in mind that platforms and exchanges where you buy, sell or trade in cryptocurrency are required to declare certain transactions to IRS and, therefore, 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 contained in this report is for informational only and should not be considered tax, legal, or advice on financial matters. Each individual’s financial situation will be particular to them, so you must seek advice from a professional before making any decisions regarding your tax situation.
In addition the laws and regulations pertaining to cryptocurrency taxation are subject to change and may differ based on the location you live in. It is your responsibility to ensure compliance with the laws and regulations in force.
In short it is regarded as property tax-wise for tax purposes in the United States, and transactions involving cryptocurrency may result in capital gains or losses, and income tax. It is essential to speak with an expert in taxation and remain current with rules and regulations to ensure that you are in compliance.
Disclaimer:
The information provided in this report is intended for informational purposes only and does not constitute legal, financial or tax advice. The information contained in this report may not be suitable for all people or circumstances. Regulations, laws and policies surrounding cryptocurrency taxes can change, and can vary depending on your location. Your responsibility is to ensure compliance with the applicable laws and regulations. This report is not intended to replace professional financial or legal advice. You should consult with a qualified attorney or financial advisor before making any decisions about your taxes.
The information in this report is intended for informational only and is not meant to be considered as financial advice. Every individual’s financial situation is individual, and you should seek advice from a professional before making any decisions regarding taxes. The information on this page is based on information that were available at the time of writing and may be subject to change in the near future. There is no guarantee as to the accuracy or completeness of the information provided. Investing in cryptocurrency is risky and you should seek advice from an expert in financial planning before investing. The performance of cryptocurrency in the past is not indicative of the future performance. The information is not intended to be used as a general guide to investing or as a source for any specific investment advice and does not offer any explicit or implied recommendations regarding how an individual’s account should be handled, as suitable investment decisions are contingent upon the individual’s specific investment objectives.