Simplifying Crypto Taxes : A Quick Guide

Why Crypto taxes are important?

Paying taxes on crypto can be a daunting task, but it's essential to understand the rules to avoid any legal issues. If you sell your tokens for a profit, you'll likely be liable for Capital Gains tax. However, there's some good news! Most exchanges allow you to export your trading history, making it easier to collate your data. Additionally, crypto tax services can help you navigate the process for a fee.

Don't forget about tax allowances! In the UK, for example, you won't pay Capital Gains tax on crypto profits below £12,500. And, if you're clever, you can even double your allowance by gifting crypto to a partner or spouse. Finally, consider taking a loan against your crypto collateral instead of selling, as this isn't taxable. Just be aware of the risks and loan-to-value ratios.

Crypto regulations

Although crypto and blockchain technology have the potential to enhance many aspects of our lives, there are some people out there who would like to clamp down on the nascent technology.

Each country has a different attitude toward cryptocurrencies. For example, China has gone as far as imposing an outright ban on cryptocurrencies. It was even reported on social media that some politicians were being threatened with the death penalty for having violated crypto-mining laws.

Meanwhile, in Switzerland, the sentiment is much more welcoming and open to the technology. The country’s government encourages entrepreneurs to create crypto companies and further develop blockchain technology.

So, why is there so much apprehension regarding cryptocurrency?

Cryptocurrencies worry regulators for myriad reasons, the two most prominent of which are:

1. Governments are fearful of cryptocurrencies being used for illicit goods, such as narcotics, weapons, and other contraband, since crypto is the preferred payment method on these dark web platforms.

2. Taxation. Regulators are fully aware that blockchain technology permits people to handle money outside the government’s purview. Therefore, governments are attempting to pass stricter taxation laws to force people to comply—and pay taxes.

The taxation landscape will be in flux for the foreseeable future; however, we still recommend you read your country’s crypto tax laws before investing!

Calculating crypto taxes can be straightforward with these steps:

1. Identify Taxable Events: Taxable events include selling crypto for fiat, trading one crypto for another, purchasing goods or services with crypto, and receiving crypto as income. Simply holding crypto isn't taxable.

2. Determine Fair Market Value: Record the value of the crypto in your local currency at the time of each transaction.

3. Calculate Gains or Losses:

- Capital Gains: Subtract the purchase price from the selling price if you sold for more than you paid.

- Capital Losses: Subtract the selling price from the purchase price if you sold for less.

4. Consider Holding Period:

- Short-Term: Held for one year or less, taxed at regular income rates.

- Long-Term: Held for more than one year, taxed at lower rates.

5. Report Income: Report the value of crypto received as payment at the time of receipt.

6. Use Tools or Professionals: Tax software and professionals can simplify the process.

7. Keep Records: Maintain detailed records of all transactions.

By following these steps & following regulations, you can accurately calculate your crypto taxes.

Now your turn:

• What is your opinion about crypto taxes?
• It should be high or low?
• In your country what is crypto regulations?
• What should be proper way to taxes on crypto?

Thank you

Learn Crypto ✅️‌‌‌‌