Cryptocurrency, also called digital or virtual currencyis one kind of decentralized currency which is not backed by any government or central authority. Because of this, the tax treatment of cryptocurrency is complex and may differ depending on the jurisdiction where you live.
In the United States, the IRS has issued a guidance document that states that cryptocurrency is considered property to the tax purpose. The result is that transactions involving cryptocurrency are subject to losses and capital gains as are transactions that involve other types of property.
For example, if you buy cryptocurrency, and sell it later at an amount that is higher, you will have a capital gain that must be reported when you file your tax returns. Conversely, if you sell the cryptocurrency at a lower price than the amount you paid for it, you’ll be able to claim the possibility of a capital loss which can be used to offset other capital gains or as much as $3,000 of ordinary income.
In addition to capital gains and losses, you may also be taxed on any cryptocurrency you receive as payment 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 also important to note that platforms and exchanges where you purchase, 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 note that the information provided in this document is for informational only and should not be considered tax, legal, or financial advice. Each person’s financial situation is unique, and you should consult a qualified tax professional prior to making any decision regarding your tax situation.
Additionally there are laws and regulations pertaining to cryptocurrency taxes are subject to change and could vary depending on your location. It is your duty to ensure that you are in compliance with all applicable laws and regulations.
In short, cryptocurrency is treated as property tax-wise in the United States, and transactions with cryptocurrency can result in the loss or gain of capital and also income tax. It is important to consult with an expert in taxation and remain current with regulations and laws to ensure compliance.
Disclaimer:
The information contained in this report is for informational purposes only . It is not intended to be advice on tax, legal or financial advice. The information contained in this report may not be applicable to all individuals or situations. The laws and regulations surrounding cryptocurrency taxes may change over time and can differ depending on where you are. Your responsibility is to make sure you comply with all relevant laws and rules. This report is not a substitute for professional legal or financial advice. You should consult with an experienced lawyer or financial advisor prior to making any decision regarding your tax situation.
The information provided in this document is for informational only and is not meant to be considered as financial advice. Each individual’s financial situation will be individual, and you should seek advice from a professional before making any decisions regarding taxes. The information provided within this document is based upon data available at the time writing and may change in the future. The accuracy or completeness of the information is provided. It is risky to invest in cryptocurrency and you should speak with an advisor in the field of finance prior to making a decision to invest. Past performance of cryptocurrency is not a guarantee 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 advice and does not offer any implicit or explicit recommendations about the way in which an individual’s account should or would be handled, as suitable investment decisions are contingent upon the specific goals of each investor.