Give to Caesar what belongs to Caesar.
But does this apply to crypto?

The taxman has been around as long as civilization. And his reach is far and wide- getting a slice of everything you earn from your income to stocks and other investments you hold. And as you probably know, not complying with tax regulations, knowingly or out of ignorance, can get you into a lot of trouble.
So, it’s understandable to want to know whether the government wants a percentage of the returns you get from investing in crypto.

In today’s article, we talk about taxation on crypto, including if and when you’re liable and how taxes on crypto are charged. Stay on to the end for our tip on keeping your taxes down.

First Things First, What Classifies as Crypto Gains?
So, cryptocurrency, and in this context, Bitcoin, was invented as an alternative currency. But quickly, its value started going up, and people were like, “Mmmh, so I can make money buying crypto for a lower price and selling when the price goes up?” So, crypto stopped being just a currency and turned into an asset too.
Long story short, you can now make money by trading crypto on crypto exchanges and peer-to-peer platforms, much like how you would trade a stock. That profit is known as gains.

Are Crypto Gains Taxed?
Yes, if you trade crypto, you’ll have to report your gains to the IRS in your tax returns at the end of the year. And it’s not just in the US that taxes crypto, but several other countries too, including Canada, the UK, Italy, India, etc.

How Does Taxation on Crypto Work?
Your crypto tax rate will depend on a couple of things, top among which is your income level and how long you held to crypto assets before selling them.
Now, taxes on crypto are classified as either short-term gains taxes or long-term gains taxes.
Short-term gains taxes apply to crypto assets you held for a year or less before selling. In this case, your gains are classified as income and charged according to the corresponding income tax bracket. That could be anywhere from 10% to 37%.
For assets held for more than a year, you pay long-term gains taxes. The tax rate, in this case, ranges from 0% to 20%.

Is Crypto Taxation a Global Thing?
If you hate having to pay taxes on your crypto gains, there’s good news. There are crypto tax havens in many parts of the world. Top among them include Germany, Portugal, Singapore, Dubai, El Salvador, Malaysia, and Malta. Has all this talk about taxes dampened your mood? The good news is that you don’t have to actually move across the continent to avoid taxes. Yes, you still got to pay the taxman. But there are ways to keep your tax liability at a minimum. So, here is our bonus tip.

How to Protect Your Gains from Massive Taxes
Hold your crypto for longer than a year: if you sell in a year or less, you can pay up to 37% in taxes. Cross the year mark, and you pay a maximum of 20%- sometimes nothing at all.
Offset your gains with your losses: you can subtract your losses from your profits to reduce your liability. Sell your crypto when your income is at your lowest: so, you fall under a lower tax bracket. Buy your crypto under a retirement account: you can hold crypto under a self-directed IRA, which enjoys tax advantages. Taxes are often inevitable, even with crypto, but you can definitely keep them low if you’re smart and follow our tips. So, found this video helpful? Hit the like button. And if you have questions or anything to add to the conversation, drop us a comment, and we’ll get back to you ASAP.

By admin

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