IRS promotes Bitcoin HODLing

[zasad@]

"Coins held for longer than one year are taxed at long-term capital gains rates of 0%, 15%, and 20%. Coins held for less than that amount of time can be taxed at short-term rates between 0% and 37%.

Moreover, those are maximum rates—what users actually pay depends on their tax bracket.

For instance, in 2021, single (aka unmarried and childless) filers pay 0% on the first $40,400 of taxable income (including the profit from the sale), 15% on amounts from $40,401 to $445,850, and 20% on the income and earnings beyond that. Those thresholds are higher for married people.

“The long-term capital gain rate has been extremely favorable,” Chandrasekera said. “We talk to these wealthy individuals, they never sell their stock positions of any type of asset without holding it for 12 months or more. So I encourage you to do the same. Just HODL.” "

https://decrypt.co/53625/one-big-reason-to-hodl-bitcoin-to-lower-taxes

I cannot yet compare this with taxes on cryptocurrency in Russia, because there are still no clear recommendations for declaring and paying taxes on cryptocurrencies.
Personal income tax in Russia is from 9 to 35%, but it is possible to pay 4% as self-employed as long as the fiat exchange amount does not exceed 2,400,000 rubles ($ 32,360).

[1715244509]

1715244509

[1715244509]

1715244509

[1715244509]

1715244509

[1715244509]

1715244509

[1715244509]

1715244509

[NeuroticFish]

Coins held for longer than one year

Are there any clarifications on how they consider these "coins held"?

I am asking because iirc in countries like Germany at first everybody rejoiced that long time holders are tax free, and the clarifications have starting to pop out that this applies only if the coins are held by certain custodians and the values are under some 600 EUR.

I mean that although the news does look good, it needs to be clarified more, and the newspaper doesn't do that for now.

[zasad@]

You are absolutely right that newspapers love nice headlines. This helps to get the minimum amount of information you need.
I communicate on the forums of accountants and electronic reporting systems and there during the day they can help you to understand the legislation in more detail or provide links to clarifications.
In the most difficult case in Russia, you can write a letter to the tax office and get an official answer in 10 days.
For now, the Russian tax authorities allow crypto users to pay tax at the minimum rate, and if the limit is exceeded, then you can register a self-employed with your wife, mother or other relative. This is done using an app on your mobile phone.

[yhiaali3]

I think that taxes on cryptocurrencies differ from one country to another, there are some countries that impose high taxes and there are some countries where Bitcoin and cryptocurrencies are fully or partially exempt from taxes permanently or according to circumstances, this is a list of countries in which cryptocurrencies are exempt from taxes :
1- Germany

2- Singapore

3- Portugal

4-Malta

5-Malaysia

6-Belarus

7-Switzerland

Source:
https://www.forbes.com/sites/rogerhuang/2019/06/24/seven-countries-where-cryptocurrency-investments-are-not-taxed/?sh=30c892de7303

[figmentofmyass]

Are there any clarifications on how they consider these "coins held"?

I am asking because iirc in countries like Germany at first everybody rejoiced that long time holders are tax free, and the clarifications have starting to pop out that this applies only if the coins are held by certain custodians and the values are under some 600 EUR.

I mean that although the news does look good, it needs to be clarified more, and the newspaper doesn't do that for now.

it's not news, just an opinion that crypto holders should take advantage of the tax incentives aimed at long term investors. the IRS already said in 2014 that bitcoin is treated as "property" for federal tax purposes. https://www.irs.gov/pub/irs-drop/n-14-21.pdf

that means that crypto transactions are subject to the standard capital gains tax regime, just like all other forms of personal property---cars, collectibles, art, whatever. there is no ambiguity about it.

short term capital gains (assets held for 1 year or less) are taxed at your ordinary tax rate, up to 37% depending what tax bracket your income puts you in. the taxes on long term capital gains (assets held for over a year) are capped at 20%. for most people, they are capped at 15%.

americans should absolutely be thinking about the tax implications of short term selling, especially during bull runs like this. minimizing tax liability in this regime is all about timing.

[Theb]

There is a clearer explanation here shown as a tax table (p. 67) created in this pdf coming from the IRS website. Also I don't think they are "promoting" it per se because the short-term and long-term capital gains rate applies to all kinds of assets and it doesn't only apply to cryptocurrencies so taxes in long-term assets might have lower rates since they are expecting more income from this capital gains rather than short-term ones which you will just get from day/swing trading.

Note: Keep in mind that some cryptocurrencies that are labelled/classified as securities might be covered in the marked-to-market rule of the IRS which treats the Capital Gain on a 60-40 basis. Capital gains in this rule is treated as 60% long-term capital gain and 40% short-term capital gain regardless on how long have you held that crypto. Bro the taxing laws in the US are so messed up. 

[squatter]

Keep in mind that some cryptocurrencies that are labelled/classified as securities might be covered in the marked-to-market rule of the IRS which treats the Capital Gain on a 60-40 basis. Capital gains in this rule is treated as 60% long-term capital gain and 40% short-term capital gain regardless on how long have you held that crypto. Bro the taxing laws in the US are so messed up. 

The mark-to-market election -- which provides huge tax advantages for those who qualify -- is unlikely to apply to anyone here. It's reserved for securities dealers, people that hold securities as capital assets with the intention of brokering them to others.

Ordinary traders and investors do not qualify, and must report all their transactions as specifically either short-term or long-term proceeds:

The mark-to-market rules are generally applicable only to dealers. Historically, Sec. 475 has defined a “dealer in securities” as a taxpayer who regularly purchases securities from or sells securities to customers in the ordinary course of a trade or business. In this regard, the securities owned by a dealer represent inventory held primarily for resale.

Distinguishing a dealer from a trader or investor is normally not difficult. A dealer makes money by serving as a middleman—a market maker—holding securities as inventory and buying and reselling securities to customers. A dealer’s income is derived from the services provided, charging a markup on buying and reselling rather than obtaining profit from price fluctuations in the securities. A stockbroker who owns shares that he or she sells to customers at a market price plus a commission would be a bona fide dealer. Floor brokers and specialists at a stock exchange are people whose business it is to put investors together and who properly receive ordinary income treatment as dealers.

Taxpayers that have customers are normally treated as dealers, while taxpayers that do not have customers but trade for their own account are normally treated as investors or traders.