Income tax on bitcoin profits?

[Hyena]

So, here in Estonia the income tax is 21%. This means that should I cash out some of my long-term bitcoin earnings the vultures will take 1/5 away.

Any tips and tricks for paying my taxes the way smart people do? (without ending up in jail and also not paying too much)

I would send the temporary fiat straight to real estate and stocks.

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[Ravocado]

I think you should call tax office in your country and ask them about cryptocurrencies exclusively - what is taxation, to give you some information. Maybe explain them a little. Because i think in many countries this area is not defined yet by tax offices.

[Ibian]

So, here in Estonia the income tax is 21%. This means that should I cash out some of my long-term bitcoin earnings the vultures will take 1/5 away.

Any tips and tricks for paying my taxes the way smart people do? (without ending up in jail and also not paying too much)

I would send the temporary fiat straight to real estate and stocks.

Lucky. ~50%. (Socialist Utopia, Denmark)

[Ekaros]

So, here in Estonia the income tax is 21%. This means that should I cash out some of my long-term bitcoin earnings the vultures will take 1/5 away.

Any tips and tricks for paying my taxes the way smart people do? (without ending up in jail and also not paying too much)

I would send the temporary fiat straight to real estate and stocks.

Lucky. ~50%. (Socialist Utopia, Denmark)

I think Finland considers it at 32% of profit. Though the loses aren't deductible...

[smeagol]

So, here in Estonia the income tax is 21%. This means that should I cash out some of my long-term bitcoin earnings the vultures will take 1/5 away.

Any tips and tricks for paying my taxes the way smart people do? (without ending up in jail and also not paying too much)

I would send the temporary fiat straight to real estate and stocks.

Lucky. ~50%. (Socialist Utopia, Denmark)

Wow, 50%! 

[Pockets]

I think you should call tax office in your country and ask them about cryptocurrencies exclusively - what is taxation, to give you some information. Maybe explain them a little. Because i think in many countries this area is not defined yet by tax offices.

I doubt many people here will know specifically about Estonia, so this is what I would do.

I know in the US that capital gains are taxed lower than ordinary income.  If that's the case in Estonia as well, you may be able to save money on taxes depending on the nature of your earnings.  Talk to a tax professional.

[Hyena]

I think you should call tax office in your country and ask them about cryptocurrencies exclusively - what is taxation, to give you some information. Maybe explain them a little. Because i think in many countries this area is not defined yet by tax offices.

I doubt many people here will know specifically about Estonia, so this is what I would do.

I know in the US that capital gains are taxed lower than ordinary income.  If that's the case in Estonia as well, you may be able to save money on taxes depending on the nature of your earnings.  Talk to a tax professional.

Thanks, I will. I also heard in a bank to tellers speaking that stocks accounts are used in order to bypass the income taxes. But that's basically just gossip I haven't checked the facts. However, maybe if I get my btc earnings to my bank account and immediately transfer the funds to my stocks account in the same bank and buy stocks, then maybe income tax is not taken?

[giantdragon]

In Latvia it is 25% 24% now!
In neighboring Russia it is just 13%, but you need to live at least 180 days here.

[skillet5]

Damn!

[JekyllIsland]

If everyone stopped paying taxes what would they do? The fact that everyone complies is the problem.

I'm sure there is a small majority in denial that believes paying taxes is the right thing to do, but that isn't the case for the majority.

[Hyena]

If everyone stopped paying taxes what would they do? The fact that everyone complies is the problem.

I'm sure there is a small majority in denial that believes paying taxes is the right thing to do, but that isn't the case for the majority.

Good point. I did a lot of research lately and came to a conclusion that the right thing to do is just to pay the taxes and not complain. People who desperately seek to avoid paying such taxes are criminals. I support paying taxes because when I buy property with my bitcoin earnings I expect my government to protect my rights for my property and so on.

[beetcoin]

If everyone stopped paying taxes what would they do? The fact that everyone complies is the problem.

I'm sure there is a small majority in denial that believes paying taxes is the right thing to do, but that isn't the case for the majority.

Good point. I did a lot of research lately and came to a conclusion that the right thing to do is just to pay the taxes and not complain. People who desperately seek to avoid paying such taxes are criminals. I support paying taxes because when I buy property with my bitcoin earnings I expect my government to protect my rights for my property and so on.

are the people who avoid taxes any more criminals than the sycophantic politicians and bank execs who spend the tax money to benefit for their own good?

[Hyena]

If everyone stopped paying taxes what would they do? The fact that everyone complies is the problem.

I'm sure there is a small majority in denial that believes paying taxes is the right thing to do, but that isn't the case for the majority.

Good point. I did a lot of research lately and came to a conclusion that the right thing to do is just to pay the taxes and not complain. People who desperately seek to avoid paying such taxes are criminals. I support paying taxes because when I buy property with my bitcoin earnings I expect my government to protect my rights for my property and so on.

are the people who avoid taxes any more criminals than the sycophantic politicians and bank execs who spend the tax money to benefit for their own good?

No they aren't. But think of the government and banksters as maffia that comes behind your door asking their share for "protecting" you from their competitors. I mean sure this shit sucks but at least there are some illusionary benefits for paying taxes and you don't get a skeleton into your closet. I would rather pay them their share than risk with going to jail. What's the point of being sick ass rich if you are locked up?

[giantdragon]

But think of the government and banksters as maffia that comes behind your door asking their share for "protecting" you from their competitors. I mean sure this shit sucks but at least there are some illusionary benefits for paying taxes and you don't get a skeleton into your closet. I would rather pay them their share than risk with going to jail. What's the point of being sick ass rich if you are locked up?

I think if you have enough Bitcoins just move away from the crappy Estonia! There are many countries in the world with significantly lower taxes and much fairer public funds spending (on healthcare/schools/infrastructure and not on the mafia)!

[JekyllIsland]

If everyone stopped paying taxes what would they do? The fact that everyone complies is the problem.

I'm sure there is a small majority in denial that believes paying taxes is the right thing to do, but that isn't the case for the majority.

Good point. I did a lot of research lately and came to a conclusion that the right thing to do is just to pay the taxes and not complain. People who desperately seek to avoid paying such taxes are criminals. I support paying taxes because when I buy property with my bitcoin earnings I expect my government to protect my rights for my property and so on.

are the people who avoid taxes any more criminals than the sycophantic politicians and bank execs who spend the tax money to benefit for their own good?

No they aren't. But think of the government and banksters as maffia that comes behind your door asking their share for "protecting" you from their competitors. I mean sure this shit sucks but at least there are some illusionary benefits for paying taxes and you don't get a skeleton into your closet. I would rather pay them their share than risk with going to jail. What's the point of being sick ass rich if you are locked up?

If you can feel satisfied as a human being with that attitude than so be it. Safety and comfort over freedom.

Imagine what the world would be like if Gandhi, MLK, founding fathers, etc. had that same mindset. Whether or not people agree this system is going to end sooner or later. You can either continue playing the game and let it drag on or work to improve our children’s futures.

I don't think satoshi had a get rich quick scheme in mind. When people think like this I greatly want bitcoin to fail. Even though i have a fair amount invested in it. It sickens me to think that people are ok with making profit and sitting back on a beach for the rest of their lives. That makes us no better than the people in power. Unless it's just everyones goal to get to the top and be in power, what kind of view is that? Where's the progress?

They had "rights" in cyprus didn't they? I'm pretty sure the Weimar republic had "rights" too. How far can we keep kicking the can?

That's just my subjective view though, everyones entitled to an opinion.

[beetcoin]

If everyone stopped paying taxes what would they do? The fact that everyone complies is the problem.

I'm sure there is a small majority in denial that believes paying taxes is the right thing to do, but that isn't the case for the majority.

Good point. I did a lot of research lately and came to a conclusion that the right thing to do is just to pay the taxes and not complain. People who desperately seek to avoid paying such taxes are criminals. I support paying taxes because when I buy property with my bitcoin earnings I expect my government to protect my rights for my property and so on.

are the people who avoid taxes any more criminals than the sycophantic politicians and bank execs who spend the tax money to benefit for their own good?

No they aren't. But think of the government and banksters as maffia that comes behind your door asking their share for "protecting" you from their competitors. I mean sure this shit sucks but at least there are some illusionary benefits for paying taxes and you don't get a skeleton into your closet. I would rather pay them their share than risk with going to jail. What's the point of being sick ass rich if you are locked up?

If you can feel satisfied as a human being with that attitude than so be it. Safety and comfort over freedom.

Imagine what the world would be like if Gandhi, MLK, founding fathers, etc. had that same mindset. Whether or not people agree this system is going to end sooner or later. You can either continue playing the game and let it drag on or work to improve our children’s futures.

I don't think satoshi had a get rich quick scheme in mind. When people think like this I greatly want bitcoin to fail. Even though i have a fair amount invested in it. It sickens me to think that people are ok with making profit and sitting back on a beach for the rest of their lives. That makes us no better than the people in power. Unless it's just everyones goal to get to the top and be in power, what kind of view is that? Where's the progress?

They had "rights" in cyprus didn't they? I'm pretty sure the Weimar republic had "rights" too. How far can we keep kicking the can?

That's just my subjective view though, everyones entitled to an opinion.

pretty much agree with everything you say. the wealthy people (not even the top 1%) are okay with the current system because their bellies are full, their luxury cars have a full tank of gas, and no one really bothers them. but that's not good enough for me. the world is a fucked up place, and to capitulate and become a "good tax paying citizen" while the banksters and politicians leech their way to the top.. ugh, i can't stand that.

[tubbyjr]

As long as you don't cash out in your local currency, you should not be required to pay taxes, although this varies by country, I speak for my area. If you do exchange for your local currency, it should be claimed as capital gains, which should be less than income taxes under normal circumstances. So if you invested $300 into bitcoin and ended up with $2,000 but cashed out $1,300, you should claim $1,000 as capital gains.

If you bought mining equipment, let's say $2,000, and used that to mine bitcoins amounting to $10,000, and cash out $5,000, you should be able to claim the mining equipment as your investment, and only have to report $3,000 as capital gains.

Note, I'm not a professional tax consultant, but I have degrees in this subject area, and have been doing taxes for myself and others for years without any issues, and they're normally the highest refunds/lowest owing that people have had, and no problems ever from the tax agency. As I said though, you need to check your local tax laws, or get advice from a tax professional or someone knowledgable in the area of personal finance.

[beetcoin]

if you don't cash out into fiat, then that gives MANY businesses the incentive to start accepting BTC. it makes buying things like cars easier since the buyer doesn't have to pay any taxes. that's only more of a reason for a business to start accepting bitcoins.

[tubbyjr]

I just read now you are reinvesting it into stocks/real estate before tax year end, I don't believe you would be required to report it as capital gains.  Not too sure about real estate, I would definitely look for counsel into that. For stocks or other securities, that would essentially be double taxation, it would practically be like you having to report capital gains, everytime you reinvest from BTC to LTC and vice versa. It would be an infinite taxation cycle. If you were simply cashing out, the above scenario would be best for you. The safest scenario is likely the one above, and it will save you a good amount of money by deducting your initial investment, however, with the further reinvestment you'll be doing, follow my latter advice and also consult someone, as tax laws vary greatly nationally.

[Hyena]

Thanks everyone for really great posts. I'm not going to quote you all so here's a general reply:

I might at some point move out from Estonia but I'm not yet sure to where as I don't see it as a near future yet. But my friend wants to move to Thailand for real one day so maybe I will let it influence me, although I like cold climates.

Also, I'm thinking of cashing out only a small fraction of my bitcoin holdings to buy an apartment and a car. This means that I am going to pay the income tax on just the bitcoins I cash out and not all of them which is a really pathetic sum of money in comparison to the whole stash.

One of the options that came to my mind is getting a job and taking a loan for 20 years like many people do. I am sure that Bitcoin rises even farther than what is my cashing-out-a-bit point, thus paying the interest on the loan would actually save me a lot of bitcoins. But then again, I really hate banks and wouldn't want to support their system by taking a loan.

Don't get me wrong as if I was not rebellious for the current system. I am but I also seek for the most rational solution. So, sooner or later I would have to explain where did I get the money to buy an apartment. In that sense I think it's wiser to pay the maffia their share. It's just one apartment and I think of the money they get as a donation to some of the good stuff the government does.

I totally agree that the current taxation and government system sucks. Also software patents shouldn't be given out, this is so deep bullshit like taking a patent on mathematics . However, I have no idea how this could be changed. Ideally every tax payer should have a choice where to send the money and the government should be somehow decentralized. I suspect that I came to be in this time-space combination segment starting from 1989 to destroy the old system but not so much to rebuild a new one