In United States you have to pay tax on your bitcoin earnings when purchase services or products using Bitcoin. Chances are - you won't get in trouble if you don't. But all of your accounts (coinbase, exchanges) are being tracked. And sooner or later all that data will be in the hands of IRS. When this happens, they can retroactively fine you for not paying taxes.
This is US only, but your local governments may do the same. Original poster is in US, so it's fair to use US as an example.
Topic: Taxes and Bitcoin - page 2. (Read 808 times)
I don't think you have to pay taxes on using or owning bitcoin anywhere in the world (don't quote me on that though). But if you decide to cash out, or selling your bitcoins for your local fiat currency, it's very possible you will have to pay a tax on your earnigns. It's important to fully inform yourself before you decide to cash out. Since bitcoin is still relatively young a lot of governments haven't been to specific on how bitcoin earnings have to be taxed. Perhaps it's for the better to consult an accountant if you're cashing out huge amounts of money.
when you start using your bitcoins to buy things or converting them into fiat then you have to pay taxes
I don't think you have to pay taxes on using or owning bitcoin anywhere in the world (don't quote me on that though). But if you decide to cash out, or selling your bitcoins for your local fiat currency, it's very possible you will have to pay a tax on your earnigns. It's important to fully inform yourself before you decide to cash out. Since bitcoin is still relatively young a lot of governments haven't been to specific on how bitcoin earnings have to be taxed. Perhaps it's for the better to consult an accountant if you're cashing out huge amounts of money.
That's a tough question. My understanding is not perfect, so check my statements and don't quote me.
* I will use the word "Bitcoin" but it applies to all crypto coins.
When to pay tax?
In USA you are only supposed to pay taxes when you pay for something in Bitcoins or cash out your Bitcoins into your bank account or USD. So technically, if you keep your bitcoins in your wallet or exchange - you don't pay tax until you cash out or use it.
I cashed out. How do I pay tax?
You should pay at the end of year when you file your taxes.
How much is the tax?
It's taxed as short-term or long-term capital gain. If you just buy Bitcoins or altcoins and HODL for over a year - you pay long term capital gain tax. That's about 15%.
If you trade actively, then its short term. Which is 25-35% depending on your income bracket, plus your state tax which is 0-5% depending on your state.
You only pay for gains. So if you bought Bitcoin for $2,000 and sold it for $4,500; then you are taxed for $2,500. If you actually lost money on your trades, you file capital loss and you get some money back in the form of tax deduction.
What forms do I need?
You need to fill out Schedule D (Form 1040) form, where you would include every single transaction. Not sure how it's supposed to work, since I have over 100,000 transactions this year =/ But there are some bitcoin tax tools, if you just google for it. Those will surely come in handy.
Good luck! Please correct me if I'm wrong on any of these.
* I will use the word "Bitcoin" but it applies to all crypto coins.
When to pay tax?
In USA you are only supposed to pay taxes when you pay for something in Bitcoins or cash out your Bitcoins into your bank account or USD. So technically, if you keep your bitcoins in your wallet or exchange - you don't pay tax until you cash out or use it.
I cashed out. How do I pay tax?
You should pay at the end of year when you file your taxes.
How much is the tax?
It's taxed as short-term or long-term capital gain. If you just buy Bitcoins or altcoins and HODL for over a year - you pay long term capital gain tax. That's about 15%.
If you trade actively, then its short term. Which is 25-35% depending on your income bracket, plus your state tax which is 0-5% depending on your state.
You only pay for gains. So if you bought Bitcoin for $2,000 and sold it for $4,500; then you are taxed for $2,500. If you actually lost money on your trades, you file capital loss and you get some money back in the form of tax deduction.
What forms do I need?
You need to fill out Schedule D (Form 1040) form, where you would include every single transaction. Not sure how it's supposed to work, since I have over 100,000 transactions this year =/ But there are some bitcoin tax tools, if you just google for it. Those will surely come in handy.
Good luck! Please correct me if I'm wrong on any of these.
Bitcoin is slowly gaining momentum - going mainstream and become the most intriguing investment method of our generation so I wouldn't be surprised that governments, not only US want to 'legalize' and tax it.
From what I know IRS classified bitcoin as intangible property so if you have traded Bitcoin you should report capital gain to the IRS. Note: intangible property is not a security.
If you want to know some more please read this article: https://www.forbes.com/sites/greatspeculations/2017/02/21/if-you-traded-bitcoin-you-should-report-capital-gains-to-the-irs/#5dc72b07e3d8
From what I know IRS classified bitcoin as intangible property so if you have traded Bitcoin you should report capital gain to the IRS. Note: intangible property is not a security.
If you want to know some more please read this article: https://www.forbes.com/sites/greatspeculations/2017/02/21/if-you-traded-bitcoin-you-should-report-capital-gains-to-the-irs/#5dc72b07e3d8
Thanks for the info Hazir, Interesting read. I sort of find it similar to gambling. If you lose money on Bitcoin, basically nothing can be done. But if you benefit from Bitcoin, they want to make sure they get some of your money.
Bitcoin is slowly gaining momentum - going mainstream and become the most intriguing investment method of our generation so I wouldn't be surprised that governments, not only US want to 'legalize' and tax it.
From what I know IRS classified bitcoin as intangible property so if you have traded Bitcoin you should report capital gain to the IRS. Note: intangible property is not a security.
If you want to know some more please read this article: https://www.forbes.com/sites/greatspeculations/2017/02/21/if-you-traded-bitcoin-you-should-report-capital-gains-to-the-irs/#5dc72b07e3d8
From what I know IRS classified bitcoin as intangible property so if you have traded Bitcoin you should report capital gain to the IRS. Note: intangible property is not a security.
If you want to know some more please read this article: https://www.forbes.com/sites/greatspeculations/2017/02/21/if-you-traded-bitcoin-you-should-report-capital-gains-to-the-irs/#5dc72b07e3d8
Don't know about US but in most countries bitcoin is taken as an asset so buying btc you are making an investment (not just exchanging your money). The rates are specific in diferent countries (I think in the US they could be even different in different states) but if you won't withdraw it in large amounts everything would be fine.
I am not really sure where to post this. I have heard rumors and even read certain things about taxes on Bitcoin in the US. If you try to withdraw coins into US currency that you will get taxed on the money you get. In other words you are essentially trading coins for currency. Is this true? Any thoughts on where I can read more about this.
Thanks
Thanks
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