Just threw down $1k on BTC with very little knowledge. I'll let you know when I get that Rolex off of it.
Sounds good, thanks again for everything, I'll post back once I'm invested, hopefully it doesn't take too long
The court case arose after the IRS found that for in each year from 2013 to 2015, only about 800 taxpayers claimed bitcoin gains. During that time, the cryptocurrency rose to $430 from about $13. So how do you determine what you owe? If you held it for one year or less, it is a considered a short-term gain and is taxed as ordinary income. Depending on your tax bracket for 2017, that could range from a tax rate of 10 percent to 39.6 percent. "It might seem innocuous and veiled and like no will follow up, but records of those transactions are available."-Samuel Boyd, Senior vice president of Capital Asset Management Group. Any bitcoin you sold or spent after owning it for more than one year is taxed as a long-term gain. Taxable rates on those gains range from 0 percent to 20 percent, with higher-income households paying the highest rate. In a nutshell, although bitcoin and its brethren are often viewed as being anonymous, not reporting your gains could be viewed as tax evasion by Uncle Sam. ______ Ruh-roh
I'd be curious how they handle inter-coin transactions. For example, let's say you buy BTC. And then do a BTC-ETH trade and end up with Ethereum. And then you trade some into random alt-coins. Was that a sale? Do you have gains at that point? On one side, it seems impossible to calculate what your gain was, since you never converted it into US Dollars. On the other side, with most assets, you can't just trade within different asset classes and avoid taxes until you get back to US Dollars.
This article popped up on CNBC today - it's a timely example of how this works from the perspective of merchants: https://www.cnbc.com/2017/11/30/now-you-can-pay-your-rent-in-bitcoin.html Now you can pay your rent in bitcoin ... ManageGo, a Brooklyn, New York-based rental platform that offers landlords and tenants payment and maintenance scheduling services through online and mobile applictions, is now adding bitcoin to the list. Starting early next year, a tenant can pay in bitcoin through the mobile app. Here's how it works: The tenant uses bitcoin and then ManageGo converts the bitcoin to dollars using Coinbase, a digital cryptocurrency broker. The landlord gets the rent payment in dollars. Since bitcoin is extremely volatile, the value is locked in at the time of the payment. There has not been a lot of demand for this service, but executives at ManageGo, which has been around for seven years, say it is only a matter of time. ... On a side note, my suspicion is that it's "not a matter of time". There's simply no significant benefit to anyone to pay their rent in bitcoins. This is where I think people just jump on board the "this sounds like a cool idea!" bandwagon, but it's still solving a problem that doesn't exist - no one complains that the methods to pay rent right now are just too difficult or time consuming or expensive.
Its impossible to calculate gains, specially with so many coins. It should be simple...you've put in X amount of dollars. Any time you pull out more than X amount of dollars, you get taxed on that amount.
I completely agree. Then there is the whole jurisdiction issue. If I am trading on a foreign exchange, am I liable for profit/losses while on the foreign exchange? Most crypto's are decentralized so no country technically has jurisdiction over cryptos. The tax men across the globe will need to rethink the whole taxation concept.
That's not how taxes work on anything though. You buy $2000 worth of BTC, it becomes worth $4000, and in your version, if you sell $2000, you owe nothing. You only owe when you sell the next $2000. Do the same with a stock and you'd owe cap gains tax on $1000 on each of the two sales. While certainly simpler, IRS won't go for your idea.
It gets tedious trading pairs. Trading BTC/ETC pair is not the same as trading BTC/USD or ETH/USD. When 15% (50 billion) of the market liquidates in a matter of 5 hours, that would me a massive crash anywhere else. So if you're trading a crypto pair, how do you value that in USD? There are dozens of exchanges and there can be a pretty significant difference in price between them all. How do you value your non fiat crypto trading pair if there is not a USD value attached?
There really isn't an alternative...there is no way for the IRS to track this, specially as millions will get into the Crypto game as time goes on. There just won't be enough man power for them to monitor this.
But it's not a stock, right? The IRS considers it property, so I think his example works -- that's how I'm planning to calculate. In your scenario, if Bitcoin's bubble pops and becomes worthless -- his gain is $0. It's really hard to determine what you've gained or lost until you cash out to your bank account. We should troll the IRS next year and enter into 1031 exchanges before trading any coins. Just exchanging one property for a similar like-kind property. Good point. Then claiming appreciation/depreciation on top of that. Think about buying 100 $eth for .07 BTC. A month later, you sell the $eth for .06 BTC, but the USD value of .06 BTC at that time is higher than the .07 BTC USD value when you first bought. Did your asset appreciate or depreciate?
I agree from a practical perspective. But from the IRS's perspective, I would think they would say "not my problem. you should have thought about that when you decided to trade cryptocurrency". I wouldn't think they would just let you avoid paying normal taxes based on the "it's difficult" argument.
Stock is property. What they are saying is that it's an asset, not currency. Same as stocks, bonds, art, housing, etc. Yes - but similar to stock, in that scenario, you should record a $1000 gain and then a $1000 loss later. Only recording net profits is a way to delay and avoid facing taxes depending on how you time it. The IRS would never allow it for any other asset class. Agreed - but that's our problem, not the IRS's. In a general, we don't get to just say calculating taxes is difficult, so I'm just going to use my own method. To be clear, I'm not saying you all wrong on the practical nature of it - that's why I think it's such an interesting question. I don't think the IRS would see it the way you or I would.
You have to record every single trading transaction, in case IRS knocks at your door. I know 99.9999% don't do this and think they only have to pay taxes after completely cashing out, but it's not true. Crypto is indeed valued as an asset instead of a currency, but the moment you're trading things change and you're starting to make gains that have to be taxed. You guys can look it up, it's incredibly tedious and I know the vast majority don't keep up with their trades, but you are walking on illegal ground here.
The exchanges need to figure out a way to do the same thing that TD Ameritrade or any other exchange does at the end of the year and send a summary report etc. That would make all of our lives easier.
Except lots of them aren't in the US and don't really care about that stuff. Their whole thing is to be unregulated and not answer to governments. They do what the have to in regard to KYC laws to avoid unwanted scrutiny, but otherwise, they aren't going to do any more than they need to.
The question isn't about if you should or shouldn't track it. Its about how one tracks it. If there is not fiat currency to value at the time of trade, how do you do it? Its very subjective. What happens if you lose your key or you send your BTC to the BCH chain? If I 'lose' my key, do I wait ten years and make the claim then to count as a loss? I personally wouldn't worry about taxes unless you are trading on Coin Base or Gemini (for US residences) or when one cashes out. However, Still track your transactions so you can at least have a record.
