Crypto Taxes - US

[n911]

I joined the masses this year into crypto world, from BTC to alt coins to ICOs. Its been non-stop learning ever since. As the year wraps up, I now am curious about tax implications.

From what I read everywhere, IRS has stated any gains within crypto will be taxed as an asset, where there will be capital gains tax on earnings.

So I have few questions that everyone may have encountered. I am not looking for financial advice.

Here are few questions:
1. If you purchased primary BTC from coinbase, then transfer them to exchange to trade alt coins. Now I assume, buying alt coin would not have any tax, as its just transfer of coin type. But what if you sell alt coins for BTC on that exchange? Is that point considered capital gain?

2. If you move your coins (BTC/ETH/LTC) to foreign exchange, and cash out in those exchange, the transfer to US bank account. Would that be considered capital gain?

3. If I purchase ICO tokens with ETH then sell tokens for ETH, and continue this cycle. Then at end, I buy goods/services using ETH, should that be taxed as capital gains?

[sp_skeptic]

IANAL, but I have extensively researched this issue.

If you sell Bitcoin for an altcoin, or the reverse, this is a taxable event. You need to figure the cash value of the coin you sold at the time of the transaction and declare that gain or loss.  This is not a popular opinion, but the IRS does not care about popular opinions.

The only alternative to paying tax on these transactions is to try to claim them as like kind exchanges, which allow you to defer any capital gain until you dispose of the crypto that you bought in the exchange. To claim this you need to file IRS form 8824. Nobody ever actually does this. If you don't, you have no leg to stand on if you don't declare your gains when you trade between cryptos. Plus, it is likely that the IRS will not allow crypto to crypto exchanges as like kind transactions.

When you spend crypto on real world goods/services, you have realized a capital gain/loss on your crypto at the value of the crypto you have spent at the time of the transaction. Again, not a popular opinion, and again, the IRS doesn't care.

I expect numerous threads on this forum in 2018/2019 from people who are astonished to have heard from the IRS that it wants a lot in taxes, interest, and penalties on their crypto transactions. It is just not realistic to imagine that the IRS will ignore this very significant source of revenue.

They have data from the exchanges. We know about Coinbase. It is likely that they have data from the other exchanges as well.

[n911]

Thanks sp_skeptic for insight.

Based what you are saying, it seems like the taxes is going to be a big pain and a potential needle to slam the coin bubble boom.
So basically, one would need to disclose any transaction to IRS after initial purchase. If the coin purchase with cash (initial transaction) is kept in the original coin value, than that doesn't need to be disclosed to IRS until that is cashed out.


If you have any sources, I would love to read more.


Biggest thing I can't seem to digest is paying taxes while the capital gains is not realized (coin transferred from one type to another). If we treat BTC/ETH as assets, then its just a commodity trade until commodity is realized to be cash then only we should be liable for tax.

The way I see it, currently IRS hasn't officially provided their stand on anything. And when they do, I am sure they will go back and hunt down all the transaction.


Why didn't recent tax bill reform include this as a major point of discussion! (sorry not to get political) But this just lets me distressed for all the crypto action I have been doing and plan to do.

[sp_skeptic]

https://www.forbes.com/sites/greatspeculations/2017/08/15/cryptocurrency-traders-risk-irs-trouble-with-like-kind-exchanges/#48a96c5626a8

There are many articles on the subject - just Google "cryptocurrency like-kind exchanges".

[pawanjain]

I joined the masses this year into crypto world, from BTC to alt coins to ICOs. Its been non-stop learning ever since. As the year wraps up, I now am curious about tax implications.

From what I read everywhere, IRS has stated any gains within crypto will be taxed as an asset, where there will be capital gains tax on earnings.

Yes it is true. The amount of money we make in the particular time will be taxed according to the regulations.

So I have few questions that everyone may have encountered. I am not looking for financial advice.

Here are few questions:
1. If you purchased primary BTC from coinbase, then transfer them to exchange to trade alt coins. Now I assume, buying alt coin would not have any tax, as its just transfer of coin type. But what if you sell alt coins for BTC on that exchange? Is that point considered capital gain?

No buying Altcoins wont be taxed and no if the BTC is sold for crypto it won't be taxed. The tax has to be paid only for Crypto to fiat transactions.

2. If you move your coins (BTC/ETH/LTC) to foreign exchange, and cash out in those exchange, the transfer to US bank account. Would that be considered capital gain?

I am not quite sure about it but Yes it should be considered as capital gain. May be the exchanges would be considering to implement the tax payments on their exchanges as well. We should probably wait for a while until the laws are established well.

3. If I purchase ICO tokens with ETH then sell tokens for ETH, and continue this cycle. Then at end, I buy goods/services using ETH, should that be taxed as capital gains?

Yes, whatever amount you withdraw at the end of your trade will be taxed according to the % of amount the law has stated. Even if you make many times the amount you invested, from many sources, it will still be taxed as it is considered as capital gain.

[sp_skeptic]

No buying Altcoins wont be taxed and no if the BTC is sold for crypto it won't be taxed. The tax has to be paid only for Crypto to fiat transactions.

I would be very interested to know your source for this. "Everyone knows" that this is true, but I'm pretty sure "everyone" is wrong.

[n911]

I read through much on this topic over last week. I am in alignment with SP_Skeptic regarding the 2017 tax for US investors. Where we can use like kind exchange to document any transactions between crypto. NOTE: This goes away for 2018.

Any any time we convert from crypto to fiat, we will have to pay taxes.

Big issue going forward to 2018, I see is for people going from one crypto to another, will have to pay in USD taxes on any gains they made through that transaction. So people will be forced to convert portion of their crypto to crypto transaction into fiat (USD). Unless people wish to pour in new set of fiat currency into their investment. (Big Mess ahead).


Regardless, I wonder there seem to be a lot less knowledge amongst the crypto investors (due to lack of responses here). Does these mean you all do not currently disclose crypto transactions on your taxes? or people just don't wish to share their experience and knowledge to community?

I understand crypto is world wide, but I would expect at least 30-40% investors from US. I would love to hear what others do currently or plan to do during their 2017 filing in US.

[logosobscura]

I understand crypto is world wide, but I would expect at least 30-40% investors from US. I would love to hear what others do currently or plan to do during their 2017 filing in US.

It's closer to around 17% based on source IP addresses to the top 10 exchanges (not reliable due to VPNs, but the best indication). I'm in the fun position of being both in the US tax system and a UK citizen- so before I moved I sold my crypto assets to a UK Limited Company, and they'll have to file in the UK for corporation tax on liquidation as they would with any other intangible asset.

[sp_skeptic]

n911 points out that the new tax law specifically disallows crypto-crypto transactions from like-kind treatment starting in 2018. This is actually good news for me, because it suggests that the IRS won't fight it for prior years and I wasn't planning to claim like-kind in 2017. So now I will claim like-kind for the 2017 tax year which will save me a lot.

Note if you do this you still have to file IRS form 8824.

Most crypto traders ignore the issues entirely. This will cost many a lot of money, time, and trouble. The IRS will catch up with those who don't declare their gains - there is a lot of potential revenue in there for them.

[tk808]

n911 points out that the new tax law specifically disallows crypto-crypto transactions from like-kind treatment starting in 2018. This is actually good news for me, because it suggests that the IRS won't fight it for prior years and I wasn't planning to claim like-kind in 2017. So now I will claim like-kind for the 2017 tax year which will save me a lot.

Note if you do this you still have to file IRS form 8824.

Most crypto traders ignore the issues entirely. This will cost many a lot of money, time, and trouble. The IRS will catch up with those who don't declare their gains - there is a lot of potential revenue in there for them.

This taxation only is applicable to U.S. based exchanges, since you would be entirely operating within the U.S. If you're trading in the U.S, and using an international exchange, then you're only liable when you hit a certain threshold of 10s of thousands i believe. I don't know the exact figure.

All i have to say is, fuck the U.S. and their new corrupt tax bill. This will carry over to the EU soon enough.

[CryptoYYZ]

FYI for Canadians who are curious, check out this article and follow up on Revenue Canada: https://turbotax.intuit.ca/tips/how-bitcoins-might-impact-your-income-taxes-333

[n911]

n911 points out that the new tax law specifically disallows crypto-crypto transactions from like-kind treatment starting in 2018. This is actually good news for me, because it suggests that the IRS won't fight it for prior years and I wasn't planning to claim like-kind in 2017. So now I will claim like-kind for the 2017 tax year which will save me a lot.

Note if you do this you still have to file IRS form 8824.

Most crypto traders ignore the issues entirely. This will cost many a lot of money, time, and trouble. The IRS will catch up with those who don't declare their gains - there is a lot of potential revenue in there for them.

Yes, after skimming the new tax bill. The definition of Like Kind Exchange was changed from Property (which crypto would count as) to Real Property (which crypto would not count as).

Either way, for 2017, I am going to place all my crypto transaction on 8824 and claim as like kind exchange.

Moving forward, I am looking to explore option to have a good tracker created or find one that will help with tax filing. I found these two applications that may have ability to do this for 2018. Any one have experience with them (Bitcoin.Tax and Cointracking.Info). Not sure if they are hoax sites, but will try to find more information about these.

Given the crypto will be taxed at normal income tax for short term transactions (especially ICO participation), I will have to consult with an knowledgeable accountant for guidance forward to reduce tax rate. Else large gains in crypto world means lots and lots of taxes.

I am going to start Telegram Channel to talk about taxes if we can get others views there.

[Blakscorpion]

The calculation is simple.
Value of your investment minus value of your final capital when you cash out equals what you have to put in your tax return.

If your hidden question is : Is there a way to hide my gain.
The answer is : Yes you can try, but every one of your trades are stored on exchanges, and if in 2 years your country look into it, and see that your strange increasing bank account value doesn't seem legit, you are completely fucked, because everything you earned might be lost in the fees of your cheating.
Worse than that, you mught have spent it already, and not be able to pay the fees anymore.
You are dead. Game over.

[n911]

The calculation is simple.
Value of your investment minus value of your final capital when you cash out equals what you have to put in your tax return.

Theory is simple, but the actual practice is not. If you buy BTC for 300, two years ago, and brought ETH from portion of it in 2017, which you invested into ICO, then you sold it to ETH. Each of those transaction is applicable to the tax calculation. Doing this for active investor in crypto ICO, coins, is quite cumbersome.

If your hidden question is : Is there a way to hide my gain.
The answer is : Yes you can try

Well I want interested in hiding my gain, but I seem to understand most of people in crypto currently are hiding the gains. I am trying to understand, is it because of lack of knowledge about tax or its truly tax free. From what i understand thus far, its definitely not tax free. So why were there only 600-800 people filing crypto on their tax return between between 2014-2016 (per IRS).

Thus, trying to find more knowledge from fellow community members, or share some knowledge thus far.

[Magister Magus]

All the matter is very confuse, but we know that terrocrats are right by definition, so we need to be prudent.
In Europe we are waiting some decisions from bruxelles, just to know what they will invent to steal our money.
Btw, at present is still relatively simple to protect crypto assets. In future...we'll see :-)

[Leocrypto da Vinci]

It's a very sensible domain. Today it's apparently very easy to avoid to pay taxes, but don't forget that any transaction is recorded, so we don't know if in the future government will find a way to come back along the chain. Be careful.

[Leverage123]

Here is a scenerio: you buy a bitcoin early 2017 for $2,000. It becomes worth $6,000. Then you invest in ethereum and in 2 months your $6000 is now worth $15,000. Then you hear great things about this alt coin and you take a chance by investing the whole $15,000. Within 2 months the alt coin has gone down dramatically. Your $15,000 is now worth $1,200. In this scenario what would someone need to pay for taxes?

[pereira4]

You can check many threads like this on the Legal section of the forum, but my advice is that you expect the worst, in other words, expect that every transaction for other coin (yes, crypto to crypto exchanges) are taxable. Also all transactions must be declared.

It is indeed insane, for example I lost trading history on now dead exchanges, Mintpal and Cryptsy, and this is now a problem whenever I want to sell gains made on there to buy a house or something.

Try to keep records of all your trading on every exchange if you ever want to sell for fiat. Without these records you may into trouble. Also I don't see how you could ever declare gains in coins that are anonymous like Monero, since there are no records on the blockchain.

If you are from the US then that is the worst place to be as far as I know since the IRS will not leave you go to anywhere in the world, these bastards will go anywhere you go.

[deepcryptomine]

I joined the masses this year into crypto world, from BTC to alt coins to ICOs. Its been non-stop learning ever since. As the year wraps up, I now am curious about tax implications.

From what I read everywhere, IRS has stated any gains within crypto will be taxed as an asset, where there will be capital gains tax on earnings.

Yes it is true. The amount of money we make in the particular time will be taxed according to the regulations.

So I have few questions that everyone may have encountered. I am not looking for financial advice.

Here are few questions:
1. If you purchased primary BTC from coinbase, then transfer them to exchange to trade alt coins. Now I assume, buying alt coin would not have any tax, as its just transfer of coin type. But what if you sell alt coins for BTC on that exchange? Is that point considered capital gain?

No buying Altcoins wont be taxed and no if the BTC is sold for crypto it won't be taxed. The tax has to be paid only for Crypto to fiat transactions.

2. If you move your coins (BTC/ETH/LTC) to foreign exchange, and cash out in those exchange, the transfer to US bank account. Would that be considered capital gain?

I am not quite sure about it but Yes it should be considered as capital gain. May be the exchanges would be considering to implement the tax payments on their exchanges as well. We should probably wait for a while until the laws are established well.

3. If I purchase ICO tokens with ETH then sell tokens for ETH, and continue this cycle. Then at end, I buy goods/services using ETH, should that be taxed as capital gains?

Yes, whatever amount you withdraw at the end of your trade will be taxed according to the % of amount the law has stated. Even if you make many times the amount you invested, from many sources, it will still be taxed as it is considered as capital gain.

Thanks for the explanation. I think this is what I remember. The tax filing is going to get convoluted for people who have made tons of transaction. I have done some and I am already feeling it. Thinking about just now showing it on the tax.

[HaberHash]

You can check many threads like this on the Legal section of the forum, but my advice is that you expect the worst, in other words, expect that every transaction for other coin (yes, crypto to crypto exchanges) are taxable. Also all transactions must be declared.

It is indeed insane, for example I lost trading history on now dead exchanges, Mintpal and Cryptsy, and this is now a problem whenever I want to sell gains made on there to buy a house or something.

Try to keep records of all your trading on every exchange if you ever want to sell for fiat. Without these records you may into trouble. Also I don't see how you could ever declare gains in coins that are anonymous like Monero, since there are no records on the blockchain.

If you are from the US then that is the worst place to be as far as I know since the IRS will not leave you go to anywhere in the world, these bastards will go anywhere you go.

Worst case you're taxed at full value of whatever you cash out, regardless of earnings.  I think the lesson is keep good records or expect to potentially pay more taxes.