Things You Should Know Before Paying Your Crypto Tax

If you’ve been involved with cryptocurrencies, you already know we have a complicated tax situation. Taxes are never fun, but they tend to be less annoying when we know what to expect. That’s why we’re here to share things you should know before paying crypto taxes.

You might not think of it, but crypto transactions can be taxed. It’s not something most people pay attention to, but it’s important to know that you should be paying crypto taxes. When you prepare your taxes by claiming the cryptocurrency you used, you’re paying a foreign tax on the income generated from the tokens. Fortunately, there are a couple of ways to minimise that impact.

What Are The Tax Rules On Crypto Gains?

The IRS has released guidelines on how it sees cryptocurrency being treated as an investment property. You can claim crypto as a capital asset when you sell a portion of your crypto holdings, but that’s only if you use them to earn a profit.

If any of your crypto is held for personal purposes, like having fun with coins as a hobby, don’t expect to list it on your tax return and get an extra deduction.

The increased value of your crypto can be treated as taxable income, depending on which method you use for treatment. However, you’ll need to determine your cost basis for each crypto instead of using an average price. This will also help eliminate any confusion about how much tax should be paid on your crypto earnings if you are making money with them.

Ways To Minimise Foreign Tax When Claiming Your Crypto

If your crypto is mostly held overseas, and you don’t intend to sell it anytime soon, there are some tax advantages to keeping your profits overseas instead of using them immediately in the United States.

You’ll want to leave your profits in the crypto wallet you used until they are worth enough that it makes sense to sell off a portion of them, pay your taxes, and use the profits in the United States.

Directly convert all the crypto you don’t plan on using into fiat currency or US treasuries. This method has two major advantages: You avoid paying a foreign tax, and you ensure that any future gains are also not subject to foreign taxes when you exchange them for US currency.

When It Comes To Taxes, There Are A Few Things You Should Keep In Mind:

Tracking two assets at once can get confusing when it’s time to file taxes. You’ll have to track the gains and profits of your cryptocurrency and those of your securities at the same time. You’ll have to know what you paid for your crypto or stock, and how much you sold it for. For this you can use a crypto portfolio tracker service which will calculate the Tax for you.

Make sure to keep an accounting of every asset you have in your name. This is true even if you didn’t use it to generate revenue. If you’re using cryptocurrencies like Bitcoin and Bitcoin Cash, there is a block chain that can prove when the transfer between wallets happened.

For the automatic taxation you can use Binocs. Binocs is one of the best services which is available for crypto taxation. Binocs will automatically calculate your crypto tax based on the profit and loss and will automatically file your tax on time.