Tax Implications of Using the CryptotaxCalculator
If you are considering using the Cryptotaxcalculator, you need to understand that the information provided here is of a general nature, not tax, accounting, or legal advice. It’s important to consider whether the information is appropriate for your situation, and to seek professional advice if necessary. Moreover, the site disclaims any implied warranties or guarantees and is not responsible for any loss or damage that may result from using the Cryptotaxcalculator.
Buying and selling cryptocurrency isn’t a taxable event
While it may not be a taxable event to buy and sell cryptocurrency, you are required to report the gain or loss when you sell the cryptocurrency. This is because the IRS classifies cryptocurrency as an intangible property. Moreover, if you make money from cryptocurrency, you may have to pay capital gains tax on the profit. It’s possible to buy and sell cryptocurrency through online platforms like Coinbase, PayPal, and Venmo.
However, there is another scenario where you may have to report your cryptocurrency gains and losses as ordinary income. The sale of a cryptocurrency or bitcoin is taxable if you sold or gave it away for profit. This is called long-term capital gains tax.
Exchanging one cryptocurrency for another is a taxable event
It is very important to understand the tax implications of exchanging one cryptocurrency for another. This new tax law makes it clear that cryptocurrency swaps are no longer a tax-free event beginning in 2018. You should consider the IRS guidance before you exchange one cryptocurrency for another. However, the guidance only applies to swaps made before Jan. 1, 2018.
You are likely to incur capital gains when you exchange one cryptocurrency for another. However, if you are buying cryptocurrency with a fiat currency, this transaction is not taxable. Therefore, you can diversify your finances with the future paychecks instead of your cryptocurrencies.
Reporting capital gains and losses on IRS form 8949
Reporting capital gains and losses on IRS form 198949 is simple and straightforward. In the first part of the form, you must list your capital gains and losses. The second part of the form deals with the period of time in which you held your assets, called the holding period. If the holding period is shorter than six months, you must use Schedule D. For a longer holding period, you need to use Schedule B.
The final part of the form asks for information about the disposition of your property. It must include the sales price and cost reported to the IRS. If the sale price is less than 50 cents, you must round up to the next cent. Otherwise, if the amount is more than fifty cents, you should round it up to the next dollar.
Gifting cryptocurrency to family members without paying tax
If you want to gift crypto to a family member, you need to follow certain steps. First, you need to open an account with a digital asset platform. The largest such platforms are Coinbase, Robinhood Crypto, and Gemini. These platforms offer user-friendly interfaces and operate like a stock trading platform.
When you gift cryptocurrency, the recipient won’t need to pay tax on the amount. However, the giver will need to provide information on how the asset was acquired. This information will enable the gift recipient to adopt the same cost basis and holding period as the gift giver. In many cases, this can help the recipient qualify for long-term capital gains rates.