Crypto Taxes
Hello Steemians. Now with tax season start and new tax bill voted in there is some craze going on about taxes on crypto...
I wanted to touch on the US tax regulations for cryptocurrency briefly so you'd not freak out and hopefully it'll still give you an idea. After that make sure you get involved with your CPA and get everything is done right.
First of all, IRS treats crypto as property which puts it in 3 categories: personal property, business property, and investment.
Basically you must account price of the cryptocurrency twice: at the time of purchase (baseline) and at the time of the sale or exchange (end conversion).
Because US dollar is an official regulated US currency, all losses and gains must be documented in USD. I hope that's no brainer, but thought I'd mention for newbies.
In order words your tax and what form you put that USD cryptocurrency equivalent will depend on
3 factors:
- you spend cryptocurrency on self,
- trade or invest,
- or spend it on your business
When you buy something for personal use.
You spent crypto on that new shiny Mavic you've been eyeing for a while. You found a site that sells drones and accepts crypto currency.
It is pretty self explanatory - when you spend it on self: you just pay personal property tax. The baseline - UDS amount you paid for your crypto when you bought it. The end conversion - the price of crypto at the time of sale.
When you trade.
Again, the same principle: you bought something paying baseline. You sold it and cashed it out - end amount. When it is cashed out - it must be taxed as gain or loss. Now that is in 2017 tax.
Investments are treated similarly.
* INCREDIBLY Important change came with last GOP tax bill: for 2018 taxes you MUST be tracking EVERY trading transaction for tax purposes. Regardless of currency: if you trade Bitcoin for Litecoin you track it! And report gains or losses to IRS. Thanks GOP! Reminder: this is for the 2018 tax.
Business investments and expenses.
You absolutely can buy merch needed to operate your business. Same principle: (end conversion)-(baseline)=(taxable amount). Except here this is called capital in nature. It may be taxable at the time you decided to sell it though - call your CPA!
If you are a merchant accepting payments in crypto your gains are called revenue in nature. Make sure to charge sales tax!!
That is all in a nutshell.
Of course the disclaimer: everything above must not be considered as a legal advise but as only a personal opinion. Consult your CPA on your taxes.
Thank you very much for reading and giving me a voice.
I appreciate your support!
Thank you,
