Most cryptocurrencies, according to the Internal Revenue Service or irs, are convertible virtual
currencies.
This means they can be used as a medium of exchange, a store of value, a unit of account,
and can be used in place of real money.
This also implies that any earnings or revenue generated by your cryptocurrencies are taxable.
Disclaimer, I'm not a financial advisor.
The video is for informational and educational purposes only.
Hey, everyone.
Welcome to Crypto Trends.
In today's video, we'll talk about cryptocurrency taxes, so make sure to subscribe to the channel
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So without further ado, let's get into it.
When is cryptocurrency taxed?
Cryptocurrencies are not taxable in and of themselves.
You are not required to pay taxes for having one for tax purposes.
The IRS considers cryptocurrencies to be property, which means if you sell or use crypto in a
transaction, you must pay taxes on it.
This is because capital gains or losses are triggered if the market value of the asset
changes.
If you receive cryptocurrency as payment for business purposes, you must report it as business
income.
How do cryptocurrency taxes work?
Because the IRS considers cryptocurrencies to be assets, they trigger tax events whether
used as payment or cashed in.
When you realize, again, that is when you sell, swap, or utilize cryptocurrency that
has gained in value, you must pay taxes on that gain.
For example, if you purchased one BTC for $6,000 and sold at three months later for
$8,000, you would owe taxes on the $2,000 gain.
At the short term, capital gains tax rate, profits from the sale of assets held for less
than a year are taxed at your regular tax rate for the 2022 tax year.
That ranges from 0% to 37% depending on your income.
Long term capital gains taxes would be due if the identical trade occurred a year or
more after the crypto purchase.
For the 2022 tax year, that would be 0%, 15%, or 20% depending on your total taxable income.
Crypto taxes function similarly to taxes on other assets or property.
In this regard.
When they are used and gains are achieved, they generate taxable events for the owners.
As a result.
The events that trigger the taxes are the most important component in comprehending
crypto taxes, types of cryptocurrency, tax events, taxable events, cryptocurrency related
taxable events include exchanging crypto for fiat money or government issued cash, purchasing,
products, services, or property.
The exchange of one cryptocurrency for another, receiving cryptocurrencies that have been
mined or forked non-taxable events.
According to the irs, the following are not taxable events.
Purchasing cryptocurrency with fiat currency, donating cryptocurrencies to a non-profit
or charity that is tax exempt, making a cryptocurrency gift to a third party subject to gifting exclusions,
moving cryptocurrency across wallets.
Cryptocurrency tax reporting.
To submit your taxes correctly, you'll need to be more organized throughout the year than
someone who doesn't have investments.
For example, you must keep a record of each Bitcoin transaction, including the amount
spent and the market value at the moment it was utilized.
You can accomplish this manually or by utilizing a blockchain solution platform that will assist
you in tracking and organizing this data.
Platforms such as Coin Tracker, for example, provide transaction and portfolio tracking,
allowing you to manage your digital assets and guarantee you have access to your Bitcoin
tax information.
Cryptocurrency capital gains and losses are recorded on IRS form 89 49, sales and dispositions
of capital assets, along with other capital gains and losses.
If you're unsure about crypto taxes, it's essential to consult with a licensed accountant
before filing them for the first time.
How can I avoid paying crypto taxes?
There are no legal ways to avoid paying taxes on cryptocurrency other than not using it.
If your cryptocurrency increased in value, you'll have to pay taxes.
Whether you sell it, use it, convert it to money, exchange it, or trade it.
Do I have to pay taxes on crypto if I don't sell it?
You only pay taxes on your cryptocurrency when you make a profit, which occurs only
when you sell, use or trade it.
The possession of a cryptocurrency is not a taxable event.
So what are your thoughts about crypto taxes?
Please let us know your thoughts in the comments section down below.
With that being said, here, we come to the end of our video.
I hope you like this video, and if so, then don't forget to subscribe to the channel so
you never miss any video.
See you in the next video.
'til then, take care.
Thanks for watching.