At my crypto tax calculator, we want to increase the knowledge and awareness of the impact made by blockchain and crypto products. One topic most people don’t seem to be aware of, even as cryptoasset owners, is the benefits and implications of crypto taxes. We break it down for you to understand exactly what that means and how it could affect you this tax season.
The IRS treats “virtual currency” as property, which means every trade you complete with cryptoassets is a taxable event.
If you sell your cryptoassets to purchase goods (iPhone X or a 1965 Ford Mustang) or services (an event planner for your Grandmother’s 90th birthday bash or a developer to build an app for your business), it’s a taxable event.
If you exchange your Ether for Bitcoin or vice versa, it’s a taxable event.
If you liquidate your cryptoassets for USD, it’s a taxable event.
Due to the increasing popularity and value of certain cryptoassets, you have the potential to make a substantial return by purchasing Bitcoin or Ether for investment purposes. It’s important to understand how capital gains taxes work if your crypto investments increase in value. A capital gain occurs when you sell a cryptoasset for more than you spent to buy a cryptoasset. In some cases, capital gains taxes can add a substantial amount to your tax bill. When considering your capital gains tax costs you should consider the following variables: federal tax rates (which offer preferential treatment for long-term capital gains) and state income tax rates. At the federal level, the amount of time you hold onto a cryptoasset has an impact on your capital gains tax rate. If you have held assets for less than a year then they are subject to short-term capital gains rates which are the same as your ordinary income tax rate. If you have held assets for more than a year then gains are subject to preferential, long-term capital gains tax treatment.
Minimize your tax liability with our easy to use calculator! Use a crypto tax calculator that will automatically categorize your transaction history and learn from your input.
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