What about the fees that crypto traders sometimes incur when they buy or sell digital assets on exchanges or other platforms? Can that reduce your taxable gains?
So let’s say I’m buying Bitcoin on Coinbase. Coinbase charges me, let’s say, a 3 percent fee. That fee can be added to my basis of the asset that I purchased. If I purchased $100 worth of Bitcoin but I also pay this $3 fee, now my basis in that Bitcoin is actually $103. When I turn around and sell it, that is advantageous for me: I’m not incurring as much gain, because my basis is higher.
What are the questions that you hear about most?
A lot of people ask, “Hey, this is only taxable once I cash out to fiat, right?” And the reality is, “No.”
When you’re disposing of assets, whether or not you actually come back to U.S. dollars, you can still incur a tax bill.
So even if I use my Bitcoin to buy another cryptocurrency like Ether, I can still be taxed on any gains I’ve seen from my initial investment?
Let’s say you buy Ethereum on Coinbase for $1,000, and you hold that for a few months and it rips — it’s at $2,000 now. You sell it to buy stable coins, or Bitcoin. If it was at $1,000 at the time you bought it, you’ve realized $1,000 in capital gains
What about evading taxes? Are there already tax lawyers specializing in cryptoshelters — or whatever it would be in the blockchain world?
There are a lot of tax lawyers who have carved a niche out into the digital asset world. And a lot of those folks can definitely help from a tax planning and tax avoidance perspective. No one we work with is helping with tax evasion — that’s illegal. But there’s a lot of smart people who can help you reduce your taxes through proper planning.
Do you have any sense of the overall tax compliance rate?
In our survey, we found that over 50 percent of crypto investors were reporting their digital asset activity on their taxes. And we’ll see the number continue to drastically go up in the years to come.
For all the latest business News Click Here
