Paying Taxes on Crypto
Theyve attracted the irs too. Despite market volatility, one thing will always be consistent. You have to pay your taxes, but as technology and legislation evolves, what should you know while crypto wants to be the new currency? It currently is being taxed as a property? Every crypto sale creates a taxable event just like selling a stock, so property is actually an umbrella of assets, equities or property bonds and commodities and real estate, and so what that means is that theres, an influx or a deflux in value. From the time you obtained a property compared to the time when you disposed of it, and so that delta is a gain or loss that you have to track and so its this notion of cost basis. What was my original obtainment value compared to when i disposed of it theres all sorts of complexities around the world when it comes to tax reporting its a really difficult topic, because theres, you know hundreds of countries that treat cryptocurrency differently as well as just their whole Tax regime expats, if you have you, know a u.s, a resident or if youre, a citizen, youre always going to be on the hook at some point. Unless you hire a tax attorney and go through some legal structuring, and so every persons, facts and circumstances are different. But if you are thinking about moving offshore for tax savings, its definitely money well spent to go and get an expert because theres a lot of entity, structuring and paperwork associated with that and residency requirements and all sorts of things you have to have buttoned up buying And selling crypto is just one piece of the ecosystem.
Activities like mining or staking also come with their own requirements as well. Staking is receiving net new assets in return for putting up your assets and for collateral, and so with the irs as well as most countries. They view that, as you performed an action to receive net new obtainment of value, and so every time you receive a staking deposit into your wallet, the irs deems that income and so its the measurement of the fair value of when you obtain that. And then you report that on the income section of your tax return, ultimately, when you dispose of it any gain or loss from that income amount, that you reported is a gain or loss, and so there is this double kind of tracking mechanism when it comes to Staking deposits so nfts the rise has been monumental were helping millions of people with nfts, and so the reporting requirements are actually pretty similar. Theyre collectibles, so theres a little bit of a difference in tax rate. If you hold them for more than a year, most people right now have not held an nft more than a year most that were starting to come up on that. So you report the gainer loss. However, its specifically identifiable, you know, nft is usually one of one or one of x and its an actual thing. Uh, a collectible that you own, and so you cant, like bitcoin, select different lots representing ownership in different nfts, its hey.
You bought this one for x. You sold it for y and you take the difference and that way it takes that reporting obligation off of the user to go and figure it out. You just hand it a form and youre good to go for now. Filers can look at crypto, like any other investments from real estate to equities people think about taxes in this lens of its a once a year activity right, im, gon na go and figure it out all before april 15th. Well, when it comes to crypto traders, thats kind of an oh crap moment for lack of better words uh where they start to plug in things and realize. Well, i have a tracking nightmare here in addition to a visibility problem. I had no idea that i was incurring all these taxable events throughout the year and now im hit with a tax bill all in april and so its kind of this unpleasant experience.