Cryptocurrency becomes very popular lately. It is said to be the future of wealth as it offers better security including optimum privacy and also offers very prospective future value. Many people are diverting their assets not only on a conventional portfolio like stocks or properties but turning into cryptocurrency. But if you are among those who think saving cryptocurrency as an asset because it is tax-free, you better think twice. Here in the US, the Internal Revenue Services (IRS) determines that cryptocurrency is taxable property. It means started in 2017, owners and/or traders of cryptocurrency will receive tax document. One thing to clearly understand, cryptocurrency ownership is not the one liable to tax but any profit made from that ownership does.
Yes, virtual investment gain is subject to tax and you know very well that you are legally required to oblige. But even with the tax document is coming, determining the amount of tax to pay from your cryptocurrency ownership or investment is still a big challenge. The fact is there’s only very few guidance already available regarding taxation of cryptocurrency. It would be much easier to have a reliable cryptocurrency tax calculator to count how much we owe in tax.
What we all know today is IRS guidance defines cryptocurrency as virtual currencies. This means there are several factors cryptocurrencies owners need to consider. Those factors are:
– The period you held the cryptocurrencies from purchase to sale.
This factor will determine whether profit from cryptocurrency ownership will liable to short term or long term tax rate. Less than one-year ownership, the profit will be liable to short-term tax and also the opposite.
– Individual tax filing status and taxable income.
This will determine the tax bracket and rate from your cryptocurrency profits.
– The tax rate on the state where you live.
Is it complicated enough? Well, that’s only the beginning. To make it even more complicated there are so many cryptocurrencies out there and IRS guidance may only cover currently mainstream cryptocurrencies like Bitcoins and Ethereum. What if you hold or trade cryptocurrencies other than Bitcoins, how do you determine how much tax you owe? It may vary in one way or another but generally, profit from all types of cryptocurrency can follow the same guidance from IRS.
Online cryptocurrency tax calculator would be very helpful and to use the calculator, you will need information of the three factors explained above: tax filing status, taxable income, and tax rate plus the tax year to count. Tax calculator for cryptocurrency counts individual transaction. It requires purchase date and selling date and the amount of the cryptocurrency and it will determine the tax amount based on the profit made. If you made multiple transactions, you will need to count it one by one and sum the amount of tax from individual transactions to determine how much tax you owed from cryptocurrency profits. So, there’s no need to worry or feel stress when you receive the tax document. There’s a reliable solution you can get to prevent a trouble with the IRS.