The constant back and
forth in regulations for crypto to crypto tax in different countries can make
it easy to get confused with cryptocurrencies. Simply put, a
cryptocurrency is a relatively recently developed medium of exchange based on
the internet. Its most noteworthy characteristic is that it does not report to
a central body governing it, unlike national currencies such as dollars and
pounds. Cryptocurrencies run on Blockchain technology.
Blockchains have
thousands, if not millions of computer systems in their networks that possess a
copy of the ledger in their storage. It is practically impossible to breach
Blockchain security due to it's level of sophistication.
Unlike traditional
data centers that can be rendered useless by several factors, including
connectivity issues, poor weather conditions, and in some places, political
pressure, Blockchains are almost non-vulnerable.
In traditional
systems and databases, an individual has the liberty of modifying databases.
This is not the case with Blockchain databases as Blockchain systems need the
consensus of the majority of the systems in their networks to make the required
changes.
The sheer potential
of Blockchain technology has lead the companies and new startups to invest in
it in a big way. Given the ground-breaking quality of Blockchain technology, it
is vital to understand some of the basics of cryptocurrencies — everything from
Crypto to crypto tax.
A cryptocurrency is
secure because of the complex cryptographic functions that need to be solved to
access them. These prevent counterfeiting and double-spending. Cryptocurrencies
are utterly immune to Government interference and manipulation as a central
authority does not govern them.
Crypto to Crypto Tax
in the US
According to the IRS,
it is compulsory to report all Bitcoin transactions, irrespective of their
value. This implies that every American taxpayer will have to keep a record of
all transactions done via Bitcoins as they regardless of the type.
It is important to
keep in mind that Bitcoins are considered assets, not currency. This means that
simple day to day transactions like shop with bitcoin online at supermarket, for example, will be
subject to capital gains tax. Your capital gains tax can be short term or long
term depending on how long you have been holding your bitcoin.
When is your Crypto
Taxable?
● When you sell
Bitcoins mined personally to a third party.
● When you sell
Bitcoins that you've bought from someone, to a third party.
● When you use the
Bitcoins, you have mined to purchase goods or services.
● When you use Bitcoins
bought from someone, to purchase goods or services.
If you hold Bitcoins
for less than a year before sale or exchange, you will have to pay a short-term
capital tax, which is equal to the regular income tax rate.
However, if you hold
Bitcoins for more than one year, your Bitcoins will be subject to Long-term
capital gains tax.
In the United States,
people in the 10%-15% income tax rate bracket, owe 0% Long-term capital tax,
people in the 25%-35% income tax bracket pay 15 %, and those in the 39.6% tax
bracket pay 20% Long-term capital gains tax.
Therefore,
individuals end up paying taxes at a rate that is lower than their income, if
they happen to have held Bitcoins for more than a year.
The regulations for
Crypto to crypto tax in India have always been amorphous. This is primarily
because the RBI doesn't seem to support cryptocurrencies, to begin with. The
severe lack of clarity of rules for the same is a clear testament to this.
The Government seems
to have taken the RBI's side on the matter and proposed a ban on
cryptocurrencies and related activities. The inter-ministerial committee (IMC)
claims to have made this proposition for the following reasons:-
●Cryptocurrencies
possess no intrinsic value and they lack all the attributes of a currency.
● All the
cryptocurrencies are entirely private enterprises as non-sovereigns and have
created them.
● Cryptocurrencies don
not match the vital characteristics of currency and hence cannot serve the
purpose of money.
●Cryptocurrencies have
demonstrated extreme fluctuations in value since the beginning.
The proposal of this
ban on cryptocurrency and declaring crypto-related activities a criminal act
has resulted in the termination of numerous crypto-related businesses. The
future certainly seems bleak for crypto enthusiasts and private companies
alike. That said, new crypto laws are expected to be introduced in the
parliament's winter session.
Crypto Tax Tools
We can't talk about
everything from Crypto to crypto tax without mentioning crypto tax tools.
Filing taxes for cryptocurrencies is a tedious task, and it is what prevents
people from investing in cryptocurrencies.
With the rapid
increase in the number of cryptocurrencies is the rise in the number of crypto
tax tools and software. These tools prove to be an integral part of crypto
trading, given how crypto users are required to maintain a list of all
transactions and report their taxes. Following are some tools you can use:
Zenledger
Zenledger is known
for making the lives of crypto traders easy. Investors can import their
transaction data and history and calculate their capital gains.
Bitcoin Taxes
This software allows
its traders to import their cryptocurrency transaction information from the
past year from a selection of well-known cryptocurrency exchanges.
Libra Tax
Libra Tax is a
universal tool that analyzes the client's crypto-related activities and in
turn, estimates their capital gains (or losses). Libra Tax is connected to
several cryptocurrency exchanges like Coinbase and Bitstamp.
No comments:
Post a Comment
Please Leave a Comment to show some Love ~ Thanks