Cryptocurrency, also known as digital or virtual currencyis one form of currency that is decentralized and not supported by any central or government authority. Because of this, the tax treatment of cryptocurrency is complex and may vary depending on the state in which you reside.
The United States, the IRS has issued guidance that states that cryptocurrency is considered property to be taxed. This means that transactions involving cryptocurrency are subject to capital gains and losses as are transactions that involve other types of property.
If, for instance, you buy cryptocurrency, and sell it later at an amount that is higher and you receive an increase in capital that has to be reported in your taxes. Conversely, 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 any other capital gains, or up to $3,000 of ordinary income.
In addition to losses and capital gains, you may also be taxed for any cryptocurrency that you use as payment for services or goods. The income you earn must be reported on your tax return and is subject to the same tax rates as other forms of income.
It’s important to keep in mind that exchanges and platforms where you buy, sell or trade in cryptocurrency must declare certain transactions to IRS, so the IRS could have details about your cryptocurrency transactions, even in the event that you don’t record them on your tax return.
It is important to understand that the information in this report is intended for informational purposes only and is not tax, legal or financial advice. Each person’s financial situation is particular to them, so you must seek advice from a professional before making any decisions about your taxes.
Additionally there are laws and regulations pertaining to cryptocurrency taxes can change, and can differ based on the location you live in. It is your responsibility to ensure compliance with all applicable laws and regulations.
In short, cryptocurrency is treated as property tax-wise in the United States, and transactions involving cryptocurrency may result in losses or capital gains and also income tax. It is crucial to speak with an expert in taxation and remain up to date with the laws and regulations to ensure the compliance.
Disclaimer:
The information contained in this report is intended for informational purposes only . It is not intended as legal, financial or tax advice. The information contained in this report may not be applicable to all individuals or situations. The laws and regulations surrounding cryptocurrency taxation can change, and can differ based on the location you live in. You are responsible to ensure compliance with the applicable laws and regulations. This report is not a substitute for professional financial or legal advice. You should consult with a qualified attorney or financial advisor prior to taking any decision regarding your tax situation.
The information in this document is for informational only and is not meant to be considered as financial advice. Every individual’s financial situation is unique, and you should consult with a qualified professional prior to making any decision regarding taxes. The information contained in this report is based upon data that were available at the time of writing and may change in the future. No guarantee of the exactness or accuracy of this information is provided. 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. Past performance of cryptocurrency does not guarantee future results. The information is not intended to serve as a general reference for investing or as a source of specific investment recommendations, and makes no implied or express recommendations concerning the manner in which any individual’s account should be handled. The appropriate investment decisions depend on the individual’s specific investment objectives.