If you’ve invested in cryptocurrency, or are a local or foreign trader who has received payments in Bitcoin, Ethereum and other non-traditional tokens from overseas, we’re here to help. Here, we offer comprehensive guidance for tax purposes regarding the taxation of cryptocurrency assets. We understand how complicated tax is for all of us, and are happy to help simplify things.
If you’ve invested in cryptocurrencies this year, you may have been surprised to find out that your crypto capital gain tax is calculated differently than those of traditional investments. If you’re investing in Bitcoin, for example, the tax rate on crypto-assets is considered a one-time exemption for long-term growth, if you hold onto your asset for over 12 months and sell it after, it won’t be taxed. This can mean that investors who sell their assets less than twelve months from when they purchased them will pay taxes at the current marginal tax rate. There have also been instances of big discrepancies when calculating Bitcoin gains for tax purposes.
What’s the difference between gains and capital gains?
Capital gains are taxed according to your income tax bracket, if your total taxable income is less than $77k, 2016 federal taxes will be deducted from any capital gain on investments.
Gains are defined as any profit made from an investment, but with one big difference, capital gains are taxed at a lower rate than ordinary income. This can be up to 20% lower if you’re in a lower tax bracket (about $38k*).
What’s the difference between ordinary gains and capital gains?
Ordinary gains are invested assets, accumulated over a long period of time, that are subject to taxation when sold or distributed. Capital gains are profits from selling assets within 12 months of acquisition, or any profits earned on cryptocurrency holdings.
How do you calculate a capital gain?
A capital gain is calculated by subtracting the proceeds from the sales price from the original buying and/or investment price.
Where do you report gains and losses?
Because cryptocurrency is considered a property, you are required to report your gains and losses to your local tax office. Some states even require it before paying out: New York residents, for example, have to report their Bitcoin capital gains in order to pay their taxes using BitPay.
What’s the best way to calculate my capital gains or losses?
The best way to calculate capital gains is to keep a record of your cryptocurrency purchases and sales, but this process can be difficult for everyone. If you wish to improve your results, there are many best crypto tax software available which offer a free online service that makes it easy for you – just follow the instructions on their website!
Binocs is a crypto tax software which has everything you need to take control of your Bitcoin, Ethereum and altcoin investments. Ask their specialists today about how much tax you should pay on your net gain and what future tax rules will mean for digital currencies.