Cryptocurrency Taxes: Common Questions Answered

Written by lucaswyland | Published 2018/02/25
Tech Story Tags: cryptocurrency-investment | cryptocurrency-tax | crypto-tax-questions | crypto-tax-answers | crypto-taxes

TLDRvia the TL;DR App

I haven’t sold any of my coins, do I still have to pay taxes?

If you are a hardcore HODLer and have only purchased crypto, you don’t owe any taxes on those coins until you sell or trigger a realization event. However, trading one coin to another (such as ETH-BTC) is in fact a taxable event and will need to be reported!

How is Bitcoin Taxed?

According to the IRS, Bitcoin and all other digital currencies are NOT treated as currencies, but are considered property (similar to stocks). When crypto is sold, the seller is taxed on the difference between the cost basis and proceeds.

What tax forms do I report my crypto trading gains on?

Your cryptocurrency trading gains/losses must be reported on your federal income return. You will need to list all of your trades on Form 8949 and report your total gains/losses on Form 1040 Schedule D.

How should I calculate my gains and losses?

When calculating your gains and losses, the IRS usually prefers the First-In-First-Out method.

What is the difference between short term and long term capital gains?

The difference between the two types of gains is simply the time held onto the coin between its purchase and sale. If you hold onto your coins for one year or more, it is considered long term gains and you qualify for a lower tax rate.

I am a Bitcoin miner. Do I need to report the coins I have mined?

Yes. The proceeds from mining Bitcoin or any other cryptocurrency will need to be reported as ordinary income. Calculate income by multiplying the amount of coins mined by the USD value of the coin at the time it was mined.

I haven’t kept records on my trading. What do I do?

First, check and see if the exchanges you have traded on let you export trading history. If not, don’t panic! The IRS treats cryptocurrency traders similar to how they treat people who trade stocks. They understand not everyone will have perfect records and expect mistakes.

If this is your case, you need to make an attempt to be as accurate as possible and put in some effort to find historical prices at the time of your trades. The IRS would much rather you estimate your cost basis on a few transactions than not report any of it.

I didn’t report any of my crypto trading gains from a previous year. What do I do?

You should meet with a qualified tax professional to discuss whether any amendments are necessary. Here are some IRS Suggestions On Amending Your Tax Return.

Easily report your cryptocurrency capital gains with CryptoTrader.Tax.

Originally published at www.cryptotrader.tax on February 24, 2018.


Published by HackerNoon on 2018/02/25