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- Why Do Bitcoins Have Value?
- How does bitcoin correlate with U.S. dollar, stocks, other asset classes?
- The brutal truth about Bitcoin
- El Salvador’s great crypto experiment
- Can Bitcoin replace the US dollar?
- Bitcoin and the U.S. Fiscal Reckoning
- What To Know About Cryptocurrency and Scams
- Donald Trump calls Bitcoin 'a scam against the dollar'
Why Do Bitcoins Have Value?
As bitcoin continues to lose value , cryptocurrency investors, speculators and enthusiasts are now confronting another hurdle -- the official beginning of a potentially nightmarish tax season. The IRS will ask everyone filing a return this year about their cryptocurrency activity, and plenty of people have questions about the tax implications of buying, selling and trading.
The IRS treats virtual currencies, like bitcoin and ether -- and even NFTs -- differently from some other assets and investments, and there are specific rules you'll need to follow if you sold or traded those assets last year.
Cryptocurrency is treated as property for tax purposes," says Shaun Hunley, a tax consultant at Thomson Reuters. There's an important caveat, however: If you used fiat currency -- that is, US dollars -- to buy crypto assets in , you don't have to report anything about it on your return. For now, at least. This is a rapidly evolving realm of tax law , and US law in general. If you sold crypto, however, you will need to report that on your return.
And if you traded one cryptocurrency for another, that's going to need to be reported, too. The good news is that reporting gains and losses is fairly straightforward once you know the ropes -- and there are tools to help you, if you're not inclined to take on the math and accounting yourself. Read on to learn everything you need to know about handling cryptocurrency on your state and federal tax returns this year. Note : The following applies to US citizens and resident aliens.
If you made money from cryptocurrencies in foreign countries, you may also have to pay taxes there. As it has been doing since , the IRS will ask about your cryptocurrency for your taxes.
This year the US Individual Income Tax Return form features a question about crypto: "At any time during , did you receive, sell, exchange or otherwise dispose of any financial interest in any virtual currency? The IRS updated the FAQ page on digital currencies to underline this point, as well, in the answer to a question about taxes: "If your only transactions involving virtual currency during were purchases of virtual currency with real currency, you are not required to answer yes to the Form question.
For now, the IRS regards bitcoin and other cryptocurrencies like property. So, if you bought bitcoin and held it all, you don't need to get into it on your tax return.
So if you have a taxable transaction, you should be checking 'yes. If you used US dollars to buy crypto on an exchange, or through a private transaction, there's no need to report it. Once you sell, and "realize" a gain or loss, you need to report it -- and pay taxes on any capital gains.
In short, they're the difference between how much an asset cost when you bought it and when you sold it. If the price went up, it's a capital gain. If it went down, it's a capital loss. The IRS has published a longer and much more detailed explanation.
The other thing to know about capital gains is that the IRS categorizes them as short-term or long-term. This works both ways. If you lost money on your crypto-shenanigans last year, you can now deduct those losses on your return. The more sophisticated exchanges may have a reporting mechanism to help you collect this kind of information. Otherwise, unless you've kept detailed records of your own, you may need to root through your email, bank account or wallet receipts.
Once you have that information in hand, there are several options available for doing the math. For example, some investors use the "first in, first out" or FIFO methodology, wherein the first coins you buy at what price they cost are also the first coins you sell. We won't cover all of the methods and math here.
You can use Google to learn more about the options for calculating capital gains. It all goes down on Schedule D , the federal tax form used to report capital gains. Yes, you'll need to report employee earnings to the IRS on a W And if you compensated contractors with crypto, you'll need to issue them a If you sold bitcoin for a gain, it qualifies as a taxable event. Though the IRS typically dedicates its investigative resources to bigger fish, audit-wise, the outfit is allocating more resources to crypto forensics, and you're better off playing it safe.
Section I of the Internal Revenue Code was recently amended as a part of the infrastructure bill. Failure to report transactions of this kind can result in felony charges. Some exchanges may send a Form K to customers who meet certain thresholds of volume or value. And for this year's tax season, Coinbase has also created a tax center with information to help Coinbase users navigate their taxes. If your platform of choice doesn't support crypto, you should be able to use whatever system it has in place for reporting capital gains or losses related to stocks as a substitute.
There are also specialized tools available, like CoinTracker , that offer dedicated support for cryptocurrency tax reporting -- including more complex scenarios for frequent traders or people holding multiple wallets. Note: We have not yet tested CoinTracker and are still assessing the crypto reporting capabilities of the major tax platforms. If you're looking for more hand-holding, we urge you to consult a tax professional.
The basic tax code is notoriously complex, and crypto activity can get awfully complicated quickly. When in doubt, hire a pro. Tell them during the year that you have crypto and you're going to transact in crypto," said Hunley. Then you get a lower tax rate, and you want to take advantage of that.
And, as with everything cryptocurrency-related: Do your research, pay your taxes and caveat emptor. The IRS wants to know about your bitcoin and cryptocurrency activity this year Everything you need to know about handling crypto tax reporting in What's bitcoin's impact on your taxes this year?
How does bitcoin correlate with U.S. dollar, stocks, other asset classes?
However, the latter is valuable because it is issued by a monetary authority and is widely used in an economy. Bitcoin's network is decentralized, and the cryptocurrency is not used much in retail transactions. One can argue that Bitcoin's value is similar to that of precious metals. Both are limited in quantity and have select use cases. Precious metals like gold are used in industrial applications, while Bitcoin's underlying technology, the blockchain , has some applications across the financial services industries. Bitcoin's digital provenance means that it might even serve as a medium for retail transactions one day.
The brutal truth about Bitcoin
Also Read Inside the Mindtree makeover strategy. In comparison, the Sensex has risen In fact, bitcoin was the best performing asset class of the last decade. However, the ride was rarely smooth. The recent rally in the digital asset has come on the back of interest from big global financial institutions such as BlackRock and Goldman Sachs. According to experts, extreme volatility is a part and parcel of cryptocurrency trading and one must be prepared for losses that could include wiping out of one's investments in this asset class. Never miss a story! Stay connected and informed with Mint. Download our App Now!!
El Salvador’s great crypto experiment
Can bitcoin surpass the dollar in popularity and make El Salvador the first state to operate entirely with a private currency? This piece was original published in Money Review and El Economista. In September , the government of El Salvador became the first to make bitcoin legal tender. This means it can now be used to make payments and settle debts, if businesses have the technology to accept it. Importantly, one of the implications of this legal change is that if creditors do not accept settlement of debts in bitcoin, then that debt is cancelled.
Can Bitcoin replace the US dollar?
Euro, Hong Kong dollar, U. NEW YORK, Oct 20 Reuters - The dollar dipped on Wednesday as risk sentiment improved and as investors focused on rising commodity prices and when global central banks are likely to begin hiking interest rates to fend off persistently high inflation. The greenback hit a one-year high against a basket of other currencies last week as market participants ramped up bets that the Federal Reserve will raise rates sooner than expected to quell rising price pressures. Those bets have faded, however, while investors are pricing for even more aggressive rate increases in other countries and as commodity-linked currencies including the Canadian and Australian dollars outperform. The dollar index was last down 0. Market participants are pricing for the Fed to raise rates twice by the end of
Bitcoin and the U.S. Fiscal Reckoning
This op-ed was originally published by The New York Times. Bitcoin, the original cryptocurrency, has been on a wild ride since its creation in Then it fell to half that value in just a few weeks. Are cryptocurrencies the wave of the future and should you be using and investing in them? Bitcoin was created by a person or group that remains unidentified to this day as a way to conduct transactions without the intervention of a trusted third party, such as a central bank or financial institution. Its emergence amid the global financial crisis, which shook trust in banks and even governments, was perfectly timed. Bitcoin enabled transactions using only digital identities, granting users some degree of anonymity. This made Bitcoin the preferred currency for illicit activities, including recent ransomware attacks.
What To Know About Cryptocurrency and Scams
Jack Dorsey is an enigma. Part sorcerous shaman , part Big Tech bro , very little is known about the ex-Twitter CEO , a man who keeps his cards close to his chest. However, when it comes to Bitcoin BTC , his cards are very much on the table. In a nutshell, Dorsey is very much a "Bitcoin Bro.
Donald Trump calls Bitcoin 'a scam against the dollar'RELATED VIDEO: The Highest Bitcoin Valuation I Have Ever Heard - Brian Estes
As bitcoin continues to lose value , cryptocurrency investors, speculators and enthusiasts are now confronting another hurdle -- the official beginning of a potentially nightmarish tax season. The IRS will ask everyone filing a return this year about their cryptocurrency activity, and plenty of people have questions about the tax implications of buying, selling and trading. The IRS treats virtual currencies, like bitcoin and ether -- and even NFTs -- differently from some other assets and investments, and there are specific rules you'll need to follow if you sold or traded those assets last year. Cryptocurrency is treated as property for tax purposes," says Shaun Hunley, a tax consultant at Thomson Reuters. There's an important caveat, however: If you used fiat currency -- that is, US dollars -- to buy crypto assets in , you don't have to report anything about it on your return.
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Bitcoin is a cryptocurrency , a digital asset designed to work as a store of value that uses cryptography to control its creation and management, rather than relying on central authorities. Over the course of bitcoin's history, it has undergone rapid growth to become a significant store of value both on- and offline. From the mids, some businesses began accepting bitcoin in addition to traditional currencies. Prior to the release of bitcoin, there were a number of digital cash technologies starting with the issuer based ecash protocols of David Chaum and Stefan Brands.