Seeking Professional Assistance
To accurately calculate your crypto gains and losses, you need to keep track of the purchase price, sale price, and other related transaction costs. The general rule is to subtract the cost basis (purchase price + transaction costs) from the sale proceeds to determine the taxable amount.
4. Holding Periods and Tax Rates
When it comes to reporting requirements, the IRS expects taxpayers to report every cryptocurrency transaction, regardless of value, on their tax returns. Failure to accurately report can lead to penalties and audits.
2. Taxable Events in Crypto
With the complexities surrounding cryptocurrency taxes, seeking professional assistance is highly recommended. A trusted tax advisor with experience in dealing with cryptocurrencies can help ensure your compliance with tax laws and help you optimize your tax position.
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Disclaimer: This article is for informational purposes only and should not be construed as legal or tax advice. It is always recommended to consult with a qualified professional before making any tax-related decisions.
Cryptocurrency Taxes in 2021: Understanding the Basics
For crypto investors in the United States, the Internal Revenue Service (IRS) issued guidance back in 2014 that classified cryptocurrencies as property for tax purposes. It means that virtual currencies are subject to the same tax principles as traditional property.
As the popularity of cryptocurrencies continues to soar, it's important for crypto investors to understand their tax obligations. In this article, we dive into the world of cryptocurrency taxes and provide a comprehensive guide to help you navigate the tax landscape in 2021.
What are Cryptocurrency Taxes?
Several taxable events trigger tax liabilities in the crypto space. These include:
3. Calculating Crypto Gains and Losses
Cryptocurrency taxes refer to the obligations imposed by governments on individuals or entities that hold, trade, or sell cryptocurrencies. These taxes are often based on the gains made from buying and selling digital assets.