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Some Questions & Answers
Bitcoin and Taxes
Very first, tax regulations differ for each country around the world, so how Bitcoin is taxed ter one country may not be the same elsewhere. Please look into the tax laws of your own country to find the specific details. What is pretty much total, is that buying Bitcoin or any other crypto-currency is not ter itself taxable. However, you are likely to be taxed when you sell or even spend those coins and make a profit. How much depends on the amount of gains, how long you possessed the coins and if and how your country taxes caudal gains.
Caudal Gains Taxes
Most countries consider Bitcoin and crypto-currencies spil renta assets, and so any gains made are taxed like caudal gains. So if you make profits from selling your coins, those profits are taxed. If you make losses, you may be able to deduct the losses and reduce your taxes.
What happens if I earned Bitcoins?
Most countries will also consider earning of crypto-currencies spil a barter transaction or payment-in-kind. You are taxed spil if you had bot given the omschrijving amount of your country’s own currency. So, for example, say your salary wasgoed paid ter part contant and part Bitcoin, and each month you received $1000 worth of Bitcoins, you are taxed like you had just received $1000. If you are paid wholly te Bitcoins, say Five BTC, then you would use the fair value. This would be the value that would paid if your regular currency wasgoed used, if known (e.g. $1000), otherwise you would use the price of Bitcoin at the time to establish your taxable income.
Receiving tips or gifts
Laws on receiving tips are likely already established te your country and should be used if you are gifted or tipped any crypto-currency. You will similarly convert the coins into their omschrijving currency value ter order to report spil income, if required.
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Do I need to verkeersopstopping or pay taxes if I own Bitcoins?
Not if you just bought Bitcoins (or any crypto-currencies) with your own money. However, if you traded, sold, or used any to purchase something, then you might. If you were given Bitcoins spil payment, spil a salary, or spil a bounty/donation, this is income and should be reported spil any other income you earn.
I didn’t stir any money out of the exchange, I just bought back ter. What about then?
Yes. A tax event occurred and you gained money, even tho’ it isn’t ter your handelsbank account. For tax purposes it is treated no differently.
The exchange doesn’t have my details and so can’t report mij, should I still pay taxes?
If you made gains for which you are required to pay taxes ter your country, and you don’t, you will be committing tax fraud.
I bought some things with Bitcoins directly, do I owe taxes?
Most likely, but depends on your country. If it’s considered spil a tax event, then you are essentially exchanging Bitcoins for goods or services. You may have gained ter doing so, and therefore it has to be reported. Say you bought 1 BTC for $Ten. Now say that Bitcoin is worth $100 and you buy a $100 bounty card. You got a $100 bounty card for only $Ten. That $90 is gains and taxable.
So are you telling I have to report every thing I buy with Bitcoin?
Yes, if your country’s tax authority has determined that gains are made when disposing of Bitcoins, like ter the US for example.
What about if I bought some Ethereum or Litecoin?
Potentially another tax event. Think of it spil selling Bitcoins back to contant, then buying your other coins with that. That sale might have gains, and so is treated the same way.
US Specific Tax Information
Where can I get verdadero tax advice on Bitcoins?
You may find your registeraccountant may not be too familar with Bitcoin. So wij have waterput together a pagina of tax attorneys, CPAs and accountants who have registered themselves spil knowledgable te this area and might be able to help.
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How are the IRS treating Bitcoins?
The IRS produed guidance te 2014 on the specific treatment of Bitcoins and other crypto-currencies, which has helped clarified the situation. Essentially:
- Bitcoin is a individual property, not a currency, and so is taxed spil a renta asset
- Gains made from converting Bitcoins into a fiat currency are subject to haber gains tax
- Purchases of goods or services with Bitcoins vereiste also account for gains
- Bitcoins and other alt-coins obtained from mining is recognised income instantaneously at their fair value
- Mining equipment can still be deducted spil a legitimate business expense
The IRS are treating Bitcoin spil property. Any gains made from the sale of individual property are subject to renta gains tax.
Tax is potentially due when a tax event occurs. For Bitcoin, this is whenever they are converted into fiat currency (e.g. US Dollars) or omschrijving. This includes selling on an exchange, selling to another person, or buying goods or services.
Each taxable event may create a build up, and spil such you need to know the date, cost poot, sale amount and any related fees.
All US citizens and residents are subject to a worldwide income tax. This means that where everzwijn money is earned, what everzwijn currency, it is taxable.
- Any gains made from selling Bitcoins within any exchange are taxable
- Any gains made from selling Bitcoins to any individual are taxable.
- Any income of products or services purchased with Bitcoins are taxable.
Income from Bitcoin Sales
When Bitcoins are sold, the income it generates can be offset against their cost but any profit or losses are hacienda gains, which is taxable.
You do not have to pay taxes on the Bitcoins themselves, and if you bought but never sold any within the year, you would have no tax liability.
It is significant to realize that the act of selling by trading is a taxable event, not when you transfer USD te or out of an exchange. Therefore you are required to keep records of all your trades spil well spil their initial cost, sale amount and fees. This, of course, is where it can gets complicated, especially if you have bot playing the market and have numerous trades, spil you would report the gains made for each individual trade.
The total gains and losses from all of your Bitcoin sells overheen the year will be accumulated and becomes your caudal build up. This is then taxed appropriately.
The rate you pay te taxes is determined by two factors:
- How long you held the coins
- Your ordinary tax rate
Gains made from assets bought and sold within a year or less are considered brief term hacienda gains, and simply added to your income for tax purposes.
Gains made from assets bought and sold after a year are considered long term caudal gains. Long term renta gains have different rates depending on your standard income rate, of 0%, 15% or 20% (if you are ter the top income tax-bracket). Since this is less than your ordinary income tax rate, so is demonstrable that keeping coins for longer is preferable with regard to taxation.
Bill earns $60,000/year. He buys 1 Bitcoin for $Ten on March 1, 2013 and sells it on November 29th, 2013 for $1,000. The cost fundament of the coin wasgoed $Ten with a 0.5% toverfee, $Ten.05. The sale income also had a 0.5% transaction toverfee, so wasgoed ter total $995. Therefore his hacienda build up wasgoed $995 – $Ten.05 = $984.95. Since he wielded the coin for a year or less, he reports brief term caudal gains on his tax terugwedstrijd the following year. The build up is added to his existing income and is taxed at his ordinary tax rate of 28%, so he pays $984.95 * 0.28 = $275.79 ter extra taxes.
Claire earns $30,000/year. She bought 1 Bitcoin for $Five on ter September 2012 and sells it on November 29th, 2013 for $1,000. The cost of the coin wasgoed $Five with a 0.5% toverfee, $Five.03. The sale income also had a 0.5% transaction toverfee, so wasgoed $995. Hier haber build up wasgoed $989.97. Since she wielded the coin for more than a year, she reports long term haber gains on hier tax terugwedstrijd the following year. Claire’s ordinary tax rate is 15%, so hier haber gains tax rate is 0%. She pays no taxes on the sale of hier Bitcoin.
Income from Bitcoin Purchases
It is more complicated when Bitcoins are used to make a meteen purchase. This is considered a barter transaction, the act of buying goods with something other than official currency.
You still have to calculate the gains that you made on the coins, because you are effectively converting them into currency or omschrijving, and this is a tax event. You use the fair price of the goods or services you are acquiring spil your sale proceeds for your coins.
Bill possesses 1 BTC that he bought for $100 with no fees te April 2013. He then buys a month’s hosting from a webstek provider, and pays te Bitcoin. The vendor normally sells the hosting for $Ten (incl tax) but Bill pays 0.02 BTC when the rate is $500/BTC. Bill’s Bitcoins are nominally converted into the fair price of the hosting te dollars to calculate any gains for tax purposes. Therefore Bill has “sold” his 0.02 Bitcoins for $Ten.00, and this is recorded and used te calculating any gains he may have made. Since his Bitcoin cost $100 his build up is $Ten.00 – ($100 * 0.02) = $8.00
It is recommended you keep a record of any purchases, including the date, fair dollar value and amount te Bitcoins so you can report them if required.
If you buy and sell stocks or securities, any renta losses you make are subject to wash sales. A wash sale occurs when you make sell at a loss but have bought a replacement stock within a 30-day window before or after the date of the sale. If the sale is determined to be a wash sale, you cannot deduct the loss within that tax year. Instead the cost onderstel is added to the replacement stocks. Wash sales are enforced to zekering people from making a sale and taking the losses within one tax year, but buying back into the stock soon after and so continuing to hold.
There is debate if wash sales are adequate to Bitcoins. On one palm, since wash sales were designed to overlook “fake” losses they could identically apply to Bitcoins, which can be traded te a similar style. However, the IRS specifically state that wash sales only apply to stocks and securities, and so are not applicable to private haber assets. To be prudent you might want to consider applying wash sales rules to your trades. You should raadpleging your CPA for further advice on whether to apply the wash sales to your trades.
No matter how you spend your Bitcoins, it would be wise to keep detailed records. If you are audited by the IRS you will likely have to vertoning this information and how you arrived at figures from your specific calculations. Given that no absolute information has bot given, filing ter good faith with detailed record-keeping will be evidence of your activity and your best attempt to report your taxes correctly. If you don’t have this information, the IRS might take a hard line and consider your Bitcoins spil income, rather than renta gains, and a zero cost if you cannot vertoning when you bought them.
Does this webstek only work on Bitcoins?
No, it works for any crypto-currencies, like Bitcoin, Bitcoin Contant, Ethereum, Litecoin, any others.
How do I get my trade gegevens?
Many exchanges provide an uitvoer capability, so you can loom into your account and download a comma-separated opstopping of your gegevens. You can then invoer that into Bitcoin.Tax and wij’ll do the surplus.
Some exchanges don’t provide a way to uitvoer your gegevens but do have an API, so so wij’ll use that if wij can. Unluckily it may need some setting up on your part. Please see instructions for each exchange.
Which exchanges do you support?
Wij evaluate and update our supported exchanges spil necessary. Some may also have become defunct, albeit you might still have exported trade information you wishs to invoer for past year. At this time,
There is also a caudillo CSV invoer feature that can be used to invoer from other exchanges. You may have to copy the trade gegevens from the webstek and waterput it into a spreadsheet and converted into our standard format.
Please voeling us if there is an exchange that has an uitvoer that you’d like us to add. Wij’ll look into it.
I don’t want to give you any private information
All wij require is that you login with an email address or an associated Google account. Wij truly don’t know anything else about you. If you determine to upgrade, you can even pay anonymously with Bitcoin or use a credit card. Our card processor, Stripe, does a fraud check on your address but wij do not store those details. Merienda you are done you can even close your account and wij delete everything about you.
Do you report my caudal gains to the IRS?
No. Wij aren’t a tax prep service, just a instrument to help you do your own taxes.