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Tax Season - What Crypto Traders Need to Know

Wisebitcoin 2021-05-26

The current hype around cryptocurrency has had a snowball effect where more and more people either jump on the bandwagon or become curious to explore more about this revolutionary new technology. This has led to various new traders dealing with Bitcoin and Ethereum, the leading virtual assets. We've seen how profitable crypto trade and investment can be, but these investments also come with a few important loopholes.

Bitcoin has proven to be resilient and has gained considerable adoption in many spheres and industries. It has also transformed the dynamics of money exchanges. Bitcoin is a currency that needs no middlemen such as a bank and can easily be used to buy diamonds, your favorite games, or even book hotels. With such extensive usage and acceptance, cryptocurrency has witnessed stellar growth in recent times and is expected to rise even higher in the future. We all wish to have our hands on things that bring us high profits, and here it is - Bitcoin Trading! 

Along with the exceptional profit and earnings you can enjoy in this industry, losses are part of the picture. For some people, the risks of bitcoin trading can be overwhelming. Authorities and regulatory bodies have been quick to review and analyze the monetary growth of the cryptocurrency market. This has led to capital gain taxes being applied to cryptocurrency exchanges as well.

 

Cryptocurrency: An Accepted Money

With the Internal Revenue Service(IRS) treating all cryptocurrencies as capital assets, it has welcomed this online money into consideration. Still, it has also posed challenges to traders. With this acceptance and recognition of virtual funds, traders are now liable to pay taxes for the profits they make.

Let's simplify this with the help of an example. Suppose you bought some bitcoin in the initial months of 2019 and held them till late 2020. With the expected soar in its total worth, you planned to exchange your profits and buy a brand new Harley Davidson bike. With this utilization of your gained money, you become liable to pay taxes to Uncle Sam. 

That's how the government is aiming to regulate your profits made in the virtual world. You owe taxes for every gain that you make. This has been done to regulate monetary transactions on all the platforms. This fact also covers any possible capital loss that you sustain. If the value of your cryptocurrency falls and you suffer losses, you do not have to pay taxes on your crypto holdings. On the contrary, these capital losses can be used to offset other income taxes you owe. 

Users should research the applicable tax laws in their own countries or states to make sure that they correctly calculate and pay taxes that they owe on their crypto tokens and assets to the government.

 

Trends and Facts To Know About Crypto

With the unparalleled growth achieved by cryptocurrencies during this short period, various trends and regulations have now come into play. Some of the most integral aspects that you need to know about bitcoin for your tax liabilities are as follows:

  • The proportion of taxes you owe to the authorities depends on the duration for which you have held the currency and your total annual income.
  • Your gains can be billed either over the short-term or long-term. This decides the tax rate for your payments. To simplify, if you held bitcoin for less than a year, you would be billed at the regular rate of income tax.
  • Any part of the cryptocurrency gained as a gift or promotional benefit is considered part of your income, but you are still liable to pay taxes on it.
  • Any exchange done via bitcoin for your desired goods and services counts as part of your taxable income.
  • Long-term gains in capital through virtual currencies held for one year or more and are taxed at a lower rate than most income taxes.
  • You are liable to pay taxes for all the profits you make over the value increment of the currency depending on the time for which you have held it.

Multi-million tech giants have been quick to analyze and predict the potency of virtual money for the coming times. With huge investments flowing in, the crypto market is estimated to soar multifold in its valuation and is expected to be seen in all spheres of monetary transactions.

It's your chance to wear the crypto trader's cap and move ahead with the times. Many exchanges can help new traders make their way into the crypto market. Wisebitcoin is one such exchange dedicated to offering exceptional facilities to its traders. With its 100x leverage and integrated cloud services, Wisebitcoin is bringing battle-tested and user-friendly crypto trading and investing services to both new and experienced traders.

To learn more about the services offered by Wisebitcoin, visit Wisebitcoin today and get started on your trading journey.