Cryptocurrency and Taxation – The Question Marks?
I bet it feels like cryptocurrencies have been around for ages based on the speed and magnitude of developments and innovations within the ecosystem. However, even Bitcoin, the original cryptocurrency, is merely 11 years old. Many areas of regulations are playing catch up, the governments are not quite sure how to tax crypto yet. In this article, we will highlight how some places are dealing with crypto taxation.
Property or not?
Some more developed countries like the U.S. have opted the approach to treat cryptos like property and as a result, your gain in crypto investments will be taxable under capital gain tax.
With growing worldwide cryptocurrency adoption, a few countries have figured out how to implement cryptocurrency tax laws. Most countries, like the US, treat and tax cryptocurrencies like property.
Taxable or not?
Of course you should consult your tax advisors but in general, the following are the taxable events related to your crypto trading:
- Selling crypto for fiat currencies like USD, HKD, EUR, etc..
- Trading crypto for other cryptos like BTC for USDT
- Spending your crypto to buy goods and services
- Mining gains as a result of a fork
The following are generally considered nontaxable:
- Buying crypto with fiat at market price
- Charity donations
- Gifting crypto
Filing your taxes
Again, you should really talk to your tax advisor, but to provide you with a general picture, your first step should be determining the cost basis. If you don’t know what it means, you should really talk to your tax advisor before making crypto investments.
After ascertaining your cost basis, you should then deduct the cost basis from the fair market value (generally speaking, the sale price). Voila, you can determine your capital gain or loss with the equation below:
fair market value – cost basis = capital gain/loss
Why should we care about crypto taxation?
Crypto is meant to be decentralized and unbureaucratic, it is however apparent that it is too big of a market to be left alone by our governments. We live in a world where communities matter and hence laws matter and all of us should strive to be the most law abiding citizen we can be.
If you own crypto, it is your responsibility to be aware of the local applicable laws and regulations in order to avoid penalties. Tax authorities now have their ways with enforcing crypto tax. In the U.S. for example, the IRS utilizes data analytics to identify users and transaction in order to aid their tax collection works.
Legal Disclaimer: The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
About Bitprive (BPVE)
Bitprive is a Blockchain startup focusing on developing a regulated global cryptocurrency OTC marketplace with 180+ popular payment methods in the world.
Verified users can list buy and sell offers on the Bitprive platform for multi-cryptocurrency trading with a wide range of digital and physical payment methods. On top of providing the platform technology and matching services, we also provide the BitEscrow Network where crypto is held in our Bitprive hot wallet before the payment is confirmed. Once the seller confirms payment, Bitprive releases the crypto from the BitEscrow Network to the buyer’s Bitprive wallet.
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