Crypto Currency

How are Cryptocurrencies Taxed in the US?

The value of most Cryptocurrencies has skyrocketed over the last six months. Although there has been a recent fall in…

The value of most Cryptocurrencies has skyrocketed over the last six months. Although there has been a recent fall in prices, if you invested in a Cryptocurrency or received it as payment before December 2017 you are still probably sitting on a substantial financial gain.

As with any financial transaction you are subject to tax in the United States if you are a US citizen. The IRS has been very clear on this since 2014, it’s therefore important for you to understand whether you have a tax liability and how much that liability may be.

This short article will give you some guidance as to how you might begin to figure out what that tax liability might be.

How Cryptocurrency is defined by the government

According to the IRS virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value. That describes Bitcoin or any Altcoin you may hold or have sold at a profit.  The IRS has stated that the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability so it might be worthwhile to know wann kryptowährung kaufen and the rules and regulations set out by your government when completing transactions or trading cryptocurrencies.

For federal tax purposes, Cryptocurrency is treated as property. General tax principles applicable to property transactions apply to transactions using Cryptocurrency. Under the currently applicable law, Cryptocurrency is not treated as currency that could generate foreign currency gain or loss for U.S. federal tax purposes.

This is an important technical distinction to note as many people view Crypto trading like forex trading, the IRS ,however, view it as a sale of property.

When does a tax liability arise?

Taking payment in Cryptocurrency

A taxpayer who receives Cryptocurrency as payment for goods or services must, in computing gross income, include the fair market value of the Cryptocurrency, measured in U.S. dollars, as of the date that the Cryptocurrency was received.

For U.S. tax purposes, transactions using Cryptocurrency must be reported in U.S. dollars. Therefore, taxpayers will be required to determine the fair market value of Cryptocurrency in U.S. dollars as of the date of payment or receipt. There is an easy way to calculate the fair market value If a Cryptocurrency is listed on an exchange and the exchange rate is established by market supply and demand.

The fair market value of the Cryptocurrency is determined by converting the Cryptocurrency into U.S. dollars (or into another real currency which in turn can be converted into U.S. dollars) at the exchange rate, in a reasonable manner that is consistently applied.

If you are self-employed and received Crypto as payment this includes you too. Self-employment income includes all gross income derived by an individual from any trade or business carried on by the individual as other than an employee. The fair market value of Cryptocurrency received for services performed as an independent contractor, measured in U.S. dollars as of the date of receipt is such income too.

Making an investment gain from trading Cryptocurrency

A taxpayer generally realizes capital gain or loss on the sale or exchange of Cryptocurrency that is a capital asset in the hands of the taxpayer. For example, stocks, bonds, and other investment property are generally capital assets. For most investors in Cryptocurrency, their coins will be a capital asset as they are bought as an investment, not as part of any business.

If this is you then you have to make a capital gains tax (CGT) payment on any gain.

For tax and accounting purposes, capital gains and losses are calculated by determining how much your cost basis has gone up or down from the time you acquired the asset. When you calculate your basis, you’ll figure the purchase price plus any related costs, such as commissions.

You need to pay the CGT when you sell or dispose of the Crypto. You may have a taxable event even if you don’t formally cash out. Anyone using cryptocurrency to pay for goods or services must treat each purchase as a sale.

Some exchanges will offer a summary of transactions which can be used to help you file your taxes but if you withdraw cryptocurrency from an exchange, the exchange can no longer track what happens, so you must make sure that you do.

What about mining Cryptocurrency?

When a taxpayer successfully “mines” Cryptocurrency, the fair market value of the virtual currency as of the date of receipt is includible in gross income.

If a taxpayer’s “mining” of Cryptocurrency constitutes a trade or business, and the “mining” activity is not undertaken by the taxpayer as an employee, the net earnings from self-employment (generally, gross income derived from carrying on a trade or business less allowable deductions) resulting from those activities constitute self-employment income and are subject to the self-employment tax.

What if I swap my Crypto for something else?

If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the Cryptocurrency, the taxpayer also has a taxable gain.

In summary

Whilst trading or taking Bitcoin or any Altcoin may seem like fun, as many projects involving blockchain technology most certainly are, these activities generate serious financial obligations in the United States.

It is important that you are careful and maintain detailed records of any transactions you make using Crypto, in particular, the equivalent US dollar value of the Crypto at the time of the transaction.

As summarised above your tax liability, be it CGT or otherwise, depends on how you are using Cryptocurrency. This short guide will give you a start, but it is always best to get professional advice when it comes to your exact tax liability, especially if your activity in this area is substantial.

Taxpayers may be subject to penalties for failure to comply with tax laws and they can be very large.

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Crypto Currency

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Key Takeaways

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Bitcoin slipped under $113,000 on Tuesday, triggering a market-wide downturn that sent Ethereum, XRP, and Solana lower. The total crypto sector fell to $3.8 trillion, down 3.5% on the day.

The price of Bitcoin dropped nearly 3% in the last day to $112,696, marking a return to levels not seen since the beginning of the month, CoinGecko data shows.

Ether dropped more than 4% to $4,100 after flirting with record highs in the past few days. Losses are spread across major altcoins, with XRP down nearly 6%, Dogecoin and Chainlink off over 5%, and Sei and Cardano plunging 8%.

The pullback comes ahead of the Fed’s Jackson Hole symposium on Friday, where Chair Jerome Powell is scheduled to deliver his keynote address. Markets are bracing for whether he signals a September rate cut or doubles down on inflation concerns, especially after US inflation data offered mixed signals in July.

The headline CPI slowed to 2.7% but core inflation edged up to 3.1% and PPI climbed 3.3%. The combination of weakening job growth and persistent price pressures has raised stagflation fears, which could complicate the Fed’s decision-making.

“Higher‑than‑expected PPI numbers (producer prices jumped 0.9% month‑on‑month against a 0.2% forecast) have complicated the Fed’s policy framework, so the market will be looking for hints on the Fed’s thinking ahead of its September policy meeting,” said QCP Capital analysts in a statement. “Last year, Powell used Jackson Hole to telegraph an easing bias; this year, Trump’s tariffs and political pressure create a much more contentious backdrop.”

Traders are still pricing in a 25-basis-point cut at the September 17 FOMC meeting, though odds have eased following hotter-than-expected inflation readings.

Analysts predict Powell will be cautious during his final Jackson Hole speech. The Fed Chair may acknowledge that risks to employment and inflation are balancing, suggesting a cut could be appropriate if trends continue, but he is unlikely to commit to a specific policy action.

Since expectations for a September cut are already priced in, any hint that action might be delayed could feel like a tightening of policy for investors.

However, signals that quantitative tightening may end or that regulatory shifts are coming could boost liquidity and potentially reignite Bitcoin’s rally toward year-end, analysts suggest.

Elsewhere, US stocks also reflected uncertainty at Tuesday’s market close.

The S&P 500 fell nearly 0.6% and the Nasdaq Composite dropped around 1.5%, while the Dow Jones Industrial Average edged up.

Tech and chipmakers led losses, with Nvidia down 3.5%, AMD off 5.4%, and Broadcom lower by 3.6%. Palantir sank 9%, the worst S&P 500 performer, while Tesla, Meta, and Netflix also slipped.

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Key Takeaways

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KindlyMD now ranks sixteenth among corporate Bitcoin holders, ahead of firms like Semler Scientific and GameStop.

Shares of the company (NAKA) fell 14% at Tuesday’s open as Bitcoin slipped from above $115,800 to $113,846 amid a market-wide pullback.

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