Cryptocurrency, also called digital or virtual money, can be described as a type of decentralized currency which is not backed by any central or government authority. Because of this, the taxation of cryptocurrency is complex and can differ based on the state where you live.
Within the United States, the IRS has issued guidance that states that cryptocurrency is considered property to the tax purpose. This means that transactions involving cryptocurrency are subject to capital gains and losses as are transactions that involve other types of property.
For instance, if you buy cryptocurrency, and sell it at an amount that is higher, you will have an income tax on the capital gain, which must be reported in your taxes. Conversely, 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 any other capital gains or up to $3,000 in ordinary income.
In addition to capital losses and gains, you may also be subject to income tax for any cryptocurrency that you use in exchange for services or goods. This income is reported as income on tax returns and will be taxed at the exact rates as other forms of income.
It’s important to keep in mind that exchanges and platforms where you buy, sell, or trade cryptocurrency must declare certain transactions to IRS Therefore, the IRS might have information on your cryptocurrency transactions, even in the event that you don’t record them on your tax return.
It is important to note that the information contained in this report is for informational purposes only and is not legal, tax, or advice on financial matters. Every individual’s financial situation is particular to them, so you must seek advice from a professional before making any final decisions about your taxes.
In addition there are laws and regulations regarding cryptocurrency taxation can change, and could be different depending on where you are. It is your duty to ensure compliance with the laws and regulations in force.
In short, cryptocurrency is treated as property tax-wise in the United States, and transactions with cryptocurrency can result in capital gains or losses as well as income tax. It is important to consult with a tax professional and stay current with laws and regulations to ensure that you are in compliance.
Disclaimer:
The information contained in this report is for informational purposes only and is not intended as legal, financial or tax advice. The information provided in this report may not be suitable for all people or situations. The laws and regulations governing cryptocurrency taxation are subject to change and may differ depending on where you are. It is your responsibility to ensure compliance with all pertinent laws and laws. This document 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 provided in this document is for informational only and is not intended to be considered financial advice. Every individual’s financial situation is unique, and you should consult with a qualified professional before making any decisions regarding your tax situation. The information on this page is based on data that were available at the time of writing and may change in the future. The exactness or accuracy of this information is provided. Investing in cryptocurrency is risky and you should speak with a financial advisor before making a decision to invest. The performance of cryptocurrency in the past does not guarantee the future performance. The information is not intended to be used as a general guide to investing or to provide any specific investment advice, and makes no explicit or implied recommendations regarding the way in which an individual’s accounts should or should be managed, since the proper investment decisions are based on the particular investment goals of the person.