Cryptocurrency Tax Issues
For people who hodl cryptos, how are you guys going to pay taxes for these? Coinbase recently lost against IRS on not reporting individuals who held more than 20K worth of Bitcoin, etc. Is anyone filing capital gains tax for Bitcoin and altcoin gains?
the general rule for forex gains is that they're treated as ordinary income. if the IRS decides to treat BTC the same as someone who trades CHF or SEK, then these exchanges will come under the gun in a hurry.
I have been under the assumption that the IRS currently treats cryptocurrencies as property making them subject to capital gains tax. Am I mistaken?
You are correct if you hold for over 1 year it is a long term cap gain.
and short-term capital gain if held for less than a year?
Correct.
https://www.irs.gov/newsroom/irs-virtual-currency-guidance
I hadn't seen the ruling declaring them property, if that's the case then you're right.
So I daytrade on GDAX with BTC and LTC. I know the 25% capital gains tax would apply. But let's say I realized a gain of $10,000. I don't cash out all of it, I only cash out $5K. Would I pay 25% on that $5K only or for $10,000?
If you salary is less than about 37K, then you do not pay capital gains tax in the US. I'm a college student with no job and about $100K in cryptos, and I don't plan on taking out more than 37K in a year, so I am not paying any taxes. If there comes a point where I need to take the money out in excess of 37K, then I expect to pay long-term capital gains tax.
However, I'm considering different options of minimizing the tax burden though. You could buy a house for BTC, and pay less in taxes that way, if the property tax for your property is less than the capital gains tax that you'd pay. Also, I know some states like Arizona and Idaho do not require capital gains tax to be paid on the sale of precious metals, if you were to buy, for example, gold with BTC.
lol this statement
This guy/girl gets it.
Just to clarify, Coinbase is reporting anyone whose total transactions were above $20,000, not anyone who holds more than $20,000 bitcoin.
"The IRS subsequently limited its demand to ask only for accounts that conducted bitcoin transactions—either exchanging bitcoin for dollars, or sending or receiving coins from another bitcoin user—worth $20,000 or more."
Capital gains? Haha. In my country crypto currencies are treated as commodity it is the same as a chair, or a shoe, so i'll have to pay 23% tax on total value not on profits, because I have not registered this trading as a business activity. Fck me.
That sucks, which country if you don't me asking?
How would Coinbase enforce that if you're shifting your holdings around? Say you bought 20k on CB and shifted that, then made a capital gains of 20k off Gemini and 20k off Bittrex.
If you have significant gains and are prepared to start cashing out I would totally recommend speaking with a CPA who can help setup a tax deferral/limitation plan.
My thoughts exactly. I need to consult with my local CPA about capital gains. I would rather pay the 25% capital gains tax rather than IRS on my ass a year later with a fine of some sort.
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