The term “cryptocurrency,” also known as digital or virtual currency, is a type of decentralized currency which is not supported by any central or government authority. Because of this, the tax treatment of cryptocurrency is complex and may differ depending on the state that you are in.
In the United States, the IRS has issued guidance stating that cryptocurrency is treated as property for tax purposes. That means that transactions that involve cryptocurrencies are subject losses and capital gains as are transactions that involve other types of property.
If, for instance, you purchase cryptocurrency and then sell it later at an amount that is higher then you’ll be able to claim an increase in capital that has to be reported on your tax return. In contrast, if you decide to sell the cryptocurrency at an amount lower than the price the amount you paid for it, you’ll have a capital loss that can serve as a way to reduce other capital gains, or up to $3,000 in ordinary income.
In addition to capital gains and losses, you may also be taxed on income on any cryptocurrency received in exchange for goods or services. The earnings must be reported in your taxes and subject to tax rate the same that apply to other forms of income.
It’s also important to remember that exchanges and platforms where you purchase, 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 them on your tax returns.
It is important to note that the information contained in this document is for informational only and is not legal, tax, or financial advice. Every individual’s financial situation is individual, and you should seek advice from a professional prior to making any decision about taxes.
In addition there are laws and regulations pertaining to cryptocurrency taxation may change over time and may vary depending on your location. It is your obligation to ensure that you are in compliance with the laws and regulations in force.
In short the cryptocurrency is considered property tax-wise in the United States, and transactions involving cryptocurrency may result in the loss or gain of capital as well as income tax. It is crucial to speak with an experienced tax professional and keep current with regulations and laws to ensure that you are in compliance.
Disclaimer:
The information in this report is for informational purposes only . It is not intended to be legal, financial or tax advice. The information in this report is not applicable to all individuals or scenarios. Laws and rules regarding cryptocurrency taxes are subject to change and may differ depending on where you are. Your responsibility is to make sure you comply with the relevant laws and rules. This document is not a substitute for expert legal or financial advice. You should seek advice from an experienced attorney or financial advisor prior to taking any tax-related decisions.
The information provided in this report is for informational only and is not meant to be considered as financial advice. Every individual’s financial situation is particular to them, and it is recommended that you seek the advice of a qualified professional prior to making any decision regarding taxes. The information contained on this page is based on information available at the time of writing and may alter in the future. No guarantee of the accuracy or completeness of the information made. The risk of investing in cryptocurrency is high and you should speak with an advisor in the field of finance prior to making a decision to invest. The performance of cryptocurrency in the past is not indicative of future results. The report is not intended to serve as a general guideline for investing or to provide any specific investment advice and does not offer any implied or express recommendations concerning how an individual’s accounts should or should be handled. The proper investment decisions are based on the particular investment goals of the person.