The term “cryptocurrency,” also called digital or virtual currency, is a type of decentralized currency which is not backed by any government or central authority. Due to this, the tax treatment of cryptocurrency can be complicated and may vary depending on the state in which you reside.
In the United States, the IRS has issued guidance stating that cryptocurrency is considered property to the tax purpose. The result is that transactions involving crypto 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 later for an amount that is higher then you’ll be able to claim a capital gain that must be reported on your tax return. In contrast, if you decide to sell the cryptocurrency for an amount lower than the price you paid for it you will have a capital loss that can serve as a way to reduce other capital gains or as much as $3,000 in ordinary income.
In addition to capital gains and losses, you may also be subject to income tax for any cryptocurrency that you use as payment for goods or services. The earnings is required to be declared as income on tax returns and will be taxed at the exact rates as other forms of income.
It’s also important to remember that the platforms and exchanges that you purchase, sell, or trade cryptocurrency are required to declare certain transactions to IRS and, therefore, the IRS could have details about your cryptocurrency transactions, even if you don’t report them on your tax return.
It is crucial to remember that the information provided in this document is for informational purposes only . It is not legal, tax and financial guidance. Each person’s financial situation is particular to them, so you must consult a qualified tax professional before making any final decisions about taxes.
In addition, the laws and regulations pertaining to cryptocurrency taxation can change, and can differ based on the location you live in. It is your duty to ensure compliance with the laws and regulations in force.
In essence it is regarded as property in taxation purposes in the United States, and transactions that involve cryptocurrency could result in capital gains or losses, and income tax. It is important to consult with an experienced tax professional and keep current with laws and regulations to ensure that you are in compliance.
Disclaimer:
The information provided in this report is for informational purposes only . It is not intended as legal, financial or tax advice. The information provided in this report might not be appropriate for all people or scenarios. Regulations, laws and policies governing cryptocurrency taxes are subject to change and could differ based on the location you live in. You are responsible to ensure compliance with all applicable laws and regulations. This report is not a substitute for professional financial or legal advice. It is recommended to consult an experienced attorney or financial advisor prior to taking any tax-related decisions.
The information in this report is for informational only and should not be considered financial advice. Each person’s financial situation is unique, and you should consult with a qualified professional before making any final decisions about your taxes. The information provided in this report is based on data available at the time writing and may alter in the future. No guarantee of the exactness or accuracy of this information given. It is risky to invest in cryptocurrency and you should seek advice from an advisor in the field of finance prior to making a decision to invest. The past performance of cryptocurrency is not indicative of the future performance. The information is not intended to be used as a general reference for investing or as a source of any specific investment recommendations and does not offer any implied or express recommendations concerning the way in which an individual’s account should be handled. The proper investment decisions are based on the individual’s specific investment objectives.