The term “cryptocurrency,” also known as virtual or digital money, can be described as a form of decentralized currency which is not backed by any government or central authority. Because of this, the tax treatment for cryptocurrency is complex and may differ depending on the jurisdiction in which you reside.
The United States, the IRS has issued guidance stating that cryptocurrency is treated as property to the tax purpose. The result is that transactions involving cryptocurrency are subject to capital gains and losses similar to transactions involving other forms of property.
For instance, if you purchase cryptocurrency and then sell it later for more money, you will have an income tax on the capital gain, which must be declared when you file your tax returns. If you sell the cryptocurrency at 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 taxed on income on any cryptocurrency you receive in exchange for goods or services. This income is reported on your tax return and is subject to the same tax rates that apply to other forms of income.
It’s important to keep in mind that the platforms and exchanges that you buy, sell or trade cryptocurrency must report certain transactions to the 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 note that the information provided in this report is intended for informational purposes only and is not legal, tax, or financial advice. Each person’s financial situation is unique, and you should consult with a qualified professional prior to making any decision about taxes.
Additionally there are laws and regulations related to cryptocurrency taxation are subject to change and could 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 in the United States, and transactions with cryptocurrency can result in losses or capital gains as well as income tax. It is crucial to speak with an experienced tax professional and keep current with rules and regulations to ensure the compliance.
Disclaimer:
The information contained in this report is for informational purposes only and is not intended to be legal, financial or tax advice. The information provided in this report might not be applicable to all individuals or situations. Laws and rules governing cryptocurrency taxes can change, and could differ depending on where you are. Your responsibility is to ensure that you are in compliance with all relevant laws and rules. This document is not intended to replace professional legal or financial advice. You should seek advice from a qualified attorney or financial advisor prior to making any tax-related decisions.
The information contained 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 seek advice from a professional before making any decisions about your taxes. The information provided on this page is based on information available at the time writing and may be subject to change in the near future. No guarantee of the quality or reliability of information made. It is risky to invest in cryptocurrency and you should speak with a financial advisor before making a decision to invest. The performance of cryptocurrency in the past is not indicative of future results. The information is not intended to be used as a general guideline for investing or as a source for specific investment recommendations, and makes no implied or express recommendations concerning the way in which an individual’s accounts should or should be handled. The proper investment decisions are based on the individual’s specific investment objectives.