Are crypto gains taxed?
Having a passive income is really important. After the lockdown was imposed on different countries worldwide, many people started realising that. Therefore many people started investing in the stock market, mutual funds, real estate and other fields. Cryptocurrencies are also one of the places where people started putting their money onto.
Therefore within the last two years in the field of cryptocurrencies, a significant amount of people have started taking interest and investing in digital coins. Although, the market of cryptocurrency is wild and unpredictable in nature. But nevertheless, people have started making great returns from crypto coins.
Crypto coins and Tax
Cryptocurrencies were invented as means for digital transactions and a solid replacement for paper currency, but it is yet to become a means for buying and selling. One of the factors that are hindering the growth of digital currencies is the instability of these coins. But investors and traders are indeed taking full advantage of this volatility to gain quick returns.
IRS, in its notice 2014-21, has mentioned that cryptocurrencies will be treated as assets that are similar to an individual’s properties. Also, from the year 2019, it has started including a question on its Form1040 to determine whether the taxpayer holds any amount of digital coins or did any transactions regarding cryptocoins during that particular financial year.
Determining the Tax
There are various kinds of taxes related to one’s assets; also the type of transactions are also important to determine the total amount of tax. But in the case of crypto coins, there are several exceptions included.
Currently, the most valuable cryptocoin is the Bitcoin, and it has been registered in the exchanges with other fiat currencies like Dollars and Euros. The treasury department of the United States has acknowledged the popularity and importance of Bitcoins, and it has also stated that the transactions related to bitcoins will not be deemed illicit by any means.
Paying taxes on Bitcoins
After the IRS has classified Bitcoin as an asset, individuals who deal with Bitcoins, including selling, buying, investing or any kind of related association with bitcoin, will make them liable to pay tax. In July 2019 IRS sent letters to ten thousand individuals whom the IRS had suspected that they made transactions in relation to Bitcoins but failed to report or mention about these transactions. It further notified those personnel that failing to report about those transactions will make them liable to bear interests, penalties or even criminal prosecution against them.
If you are dealing with cryptocurrencies, specifically Bitcoins, you should pay your taxes to avoid any kind of conflict that can arise. Now that IRS has made it mandatory, dealing with Bitcoins has become taxable for individuals.