Cryptocurrency, also called digital or virtual currencyis one type of decentralized currency that is not backed by any central or government authority. Because of this, the taxation of cryptocurrency can be complicated and may vary depending on the jurisdiction that you are in.
Within the United States, the IRS has issued guidance stating that cryptocurrency is considered property to the tax purpose. This means that transactions involving cryptocurrency are subject to losses and capital gains, just like transactions involving other types of property.
For instance, if you buy cryptocurrency but sell it at a higher price then you’ll be able to claim an increase in capital that has to be reported in your taxes. Conversely, if you sell the cryptocurrency at less than what you paid for it you’ll be able to claim a capital loss that can use to pay off other capital gains or as much as $3000 in normal income.
In addition to capital gains and losses In addition, you could be subject to income tax for any cryptocurrency that you use in exchange for services or goods. The earnings is required to be declared 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 exchanges and platforms where you purchase, sell, or trade cryptocurrency must declare certain transactions to IRS and, therefore, the IRS may have information about your cryptocurrency transactions, even when you don’t declare the transactions on your tax return.
It is important to note that the information provided in this document is for informational only and is not intended to be legal, tax and financial guidance. Each individual’s financial situation will be individual, and you should seek advice from a professional before making any final decisions regarding your tax situation.
Additionally the laws and regulations pertaining to cryptocurrency taxation can change, and could be different depending on where you are. It is your obligation to ensure that you are in compliance with all applicable laws and regulations.
In essence the cryptocurrency is considered property in taxation purposes in the United States, and transactions with cryptocurrency can result in losses or capital gains, and income tax. It is crucial to speak with an expert in taxation and remain current with laws and regulations to ensure that you are in compliance.
Disclaimer:
The information provided in this report are for informational purposes only and is not intended as advice on tax, legal or financial advice. The information contained in this report might not be applicable to all individuals or circumstances. Laws and rules surrounding cryptocurrency taxation can change, and may vary depending on your location. It is your responsibility to make sure you comply with all relevant laws and rules. This document is not a substitute for expert financial or legal advice. You should consult with an experienced lawyer or financial advisor prior to taking any decisions about your taxes.
The information in this document is for informational purposes only and is not meant to be considered as financial advice. Every individual’s financial situation is individual, and you should seek advice from a professional prior to making any decision regarding taxes. The information provided in this report is based on information available at the time the report’s creation and could alter in the future. There is no guarantee as to the accuracy or completeness of the information provided. Investing in cryptocurrency is risky and you should speak with a financial advisor before making a decision to invest. Past performance of cryptocurrency is not a guarantee of the future outcomes. The report is not intended to serve as a general guide to investing or as a source for any specific investment recommendations, and makes no explicit or implied recommendations regarding the way in which an individual’s accounts should or should be handled. The proper investment decisions are based on the particular investment goals of the person.