How to Pay Taxes on Cryptocurrencies: A Guide for US Taxpayers

As the popularity of cryptocurrencies continues to grow, more and more people are wondering how they will be taxed. For US taxpayers, it can be a bit confusing to figure out what is taxable and what is not. In this blog post, we will provide a guide on how to pay taxes on cryptocurrencies. We will cover everything from which taxes apply to how to report your transactions. So, if you are looking for information on taxes and cryptos, you have come to the right place!

How are Cryptocurrencies taxed in the USA?

The IRS treats cryptocurrencies as property for tax purposes. This means that any gains or losses you realize on your cryptocurrency investments will be taxed as capital gains or losses. If you hold your crypto for more than one year, you will be taxed at the long-term capital gains rate, which is currently 20%. However, if you hold your crypto for less than one year, you will be taxed at your ordinary income tax rate, which could be higher than 20%. (this can be up to 37 percent as of the year 2022 depending on your overall income)

In addition to capital gains taxes, you may also owe taxes on any interest or dividends that your cryptocurrency generates. For example, if you own a Bitcoin and it goes up in value, you will owe taxes on the gain when you sell it. Similarly, if you own a crypto that pays dividends, you will owe taxes on those dividends.

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Finally, if you use your cryptocurrency to purchase goods or services, you may also be subject to sales taxes. For example, if you buy a new car with Bitcoin, you will owe taxes on the purchase price of the car.

How do I report my Cryptocurrency taxes?

If you have realized gains or losses on your cryptocurrency investments, you will need to file a Form 8949 with your annual tax return. This form is used to report capital gains and losses from all types of property, including cryptocurrencies. On Form 8949, you will need to list each transaction that resulted in a gain or loss. For each transaction, you will need to provide the date of the transaction, the type of crypto involved, the number of units sold, and the sales price.

If you received interest or dividends from your cryptocurrency holdings, you will need to report this income on your tax return. The IRS has a special form for reporting interest and dividends, called Form W- taxes on crypto -DIV. On this form, you will need to list each payer and the amount of interest or dividends you received from them.

Finally, if you used cryptocurrency to purchase goods or services, you may need to file a state sales tax return. This will vary depending on which state you live in. For example, in New York State, taxpayers who make purchases using Bitcoin must pay a sales tax on the purchase price of the item.

In conclusion, taxes on cryptocurrency can be a bit confusing. However, by following the guidelines outlined in this blog post, you should be able to file your taxes with confidence. If you have any further questions about taxes and cryptos, please feel free to contact us. We would be happy to help! Thanks for reading!

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Source: https://www.curadebt.com/tax-debt-relief/

Source: https://www.curadebt.com/how-to-legally-avoid-taxes-on-cryptocurrency/

Source: https://www.coindesk.com/policy/2022/08/16/irs-to-serve-summons-to-crypto-dealer-sfox-looking-for-possible-tax-evaders/