The way how digital currencies improved over time is incredible. When you look closer, everything started with an idea that Satoshi Nakamoto had. No one exactly knows who he is, but his ideas started some sort of revolution in the financial and digital world.
Becoming a good crypto trader or investor is impossible without understanding the idea that Satoshi Nakamoto had. Websites like pitchengine.com analyzed his influence on the entire world and reading that analysis should be the first step you make.
After analyzing the history of digital currencies, the next thing is to get familiar with all the opportunities you have. It is hard to determine how many cryptos are there in the world. Many brands developed their own digital currency to reach more people in that way.
Everything may look nice and confusing at the same moment. Digital currencies can truly help people ensure their financial stability. However, if you want to ensure everything you do is legal, getting familiar with crypto taxes is another thing.
Not being aware of the obligations you have won’t allow you to become successful. There are many tax tips and tricks for Bitcoin and cryptocurrencies that you should know about. Reading the list below will help you get familiar with the legal side of digital currencies. Let’s find them out together!
Tax Laws Aren’t the Same Everywhere
First of all, we need to say one thing – digital currencies ARE regulated in most parts of the world. Indeed, there are some countries like Algeria, China, and others where digital currencies are banned. However, these countries will probably have to change their laws because the demand for digital currencies is exploding every day.
In most cases, governments around the world consider digital currencies as capital assets. That is the reason why people that establish income with digital currencies will have to pay capital gain taxes.
How much you will pay the tax depends on your capital losses and gains. Despite that, you will also need to calculate how long have you held the assets you earned and check out the specific regulations of your state/country.
To conclude, there are four things you will need to define before paying the crypto tax. Those four factors are – costs, the value of the sale, the date of the transaction, and all the fees that you had connected with each transaction you made.
Get Familiar with Taxable Events
Do you always need to pay taxes? In most cases, you will need to have them in mind. However, that directly depends on the taxable events you have. There are four of them that you need to have in mind when working with digital currencies.
Before everything, you will need to pay taxes whenever you convert your digital assets into fiat currency. That counts for all traditional currencies such as Euro, Dolar, Yen, etc. On the other hand, you will need to pay the tax whenever you trade one type of crypto for another one. For instance, if you want to buy LTCs with BTCs, that type of trading comes with specific taxes.
The third type of tax is connected with our everyday habits. People are purchasing different stuff almost every day. The good news for them is that many online shops now accept crypto-based payments. Purchasing a good or service with digital currencies also comes with a specific tax. This is the type of cost most people are not familiar with.
Finally, not everyone manages to earn digital currency with trading and investing. Some people would simply require crypto payments for services they offer. Despite that, crypto mining is one of the most popular ways to improve financial stability. All these types of earnings come with a particular tax value that you will need to pay.
Get Familiar with Non-Taxable Events
Yes, the good news for all crypto users that you paying taxes sometimes isn’t mandatory. For instance, whenever you buy cryptos with fiat currencies, you do not have any tax obligations. That’s going to be the task of a person that sells you the coins. On the other hand, you always have the right to donate digital currencies. Taxes for something like that do not exist.
What if you want to send a crypto gift? In that case, the amount of money you will have to pay depends. If you send a gift to a family member, child, or husband/wife, the taxes do not exist. However, if you are sending a gift to a friend or someone else, you will need to pay gift taxes. In that case, the fees are a bit different.
Everyone Needs to Pay the Tax
Let’s imagine that you are an American who currently lives in France. Do you need to pay crypto taxes? Unfortunately for you, the answer to that question is yes. All the citizens and residents of America need to pay income tax. It doesn’t matter if you convert currencies into dollars or euros, the same rule counts for everyone.
The same rule counts when you are buying a product or service. There is one thing that people commonly do not understand. Even if you are hiring a graphic designer from some other country, you will need to pay national tax in your country.
You Need to Pay Tax Even When You Don’t Cash Out the Cryptos
Let’s imagine that you sold your Bitcoins for dollars. However, you didn’t cash out that money, and you decided to purchase Litecoins. Even in that case you are subject to income tax. The law treats you in the same way it would treat you when you sell the coins for a traditional currency.
To conclude, cryptos become taxable whenever you sell them. The way how you sell them is irrelevant.
These five pieces of advice will help you understand crypto taxes better. However, the main point of the article is located at the beginning of the article. Work on your education before you start the journey. Analyze the history of your crypto, check out whether it has the perspective to grow or not, and try to connect with experienced investors. The last option will help you get some valuable pieces of advice that you can apply when developing your own crypto strategy.