do I pay capital gain tax on trades if don't cash out?

[johnb1975442]

Hi Folks!  I am a HODL'er and all of my bitcoin is on my Ledger wallet.  If I move it all back onto my exchange and sell it for a profit before the next big dip, then buy low a few weeks later and then move it all back immediately to my cold wallet, do I get taxed even though I am not cashing out?  Thank you all.

 

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[Stalker22]

Hi Folks!  I am a HODL'er and all of my bitcoin is on my Ledger wallet.  If I move it all back onto my exchange and sell it for a profit before the next big dip, then buy low a few weeks later and then move it all back immediately to my cold wallet, do I get taxed even though I am not cashing out?  Thank you all.

 

You forgot to mention the location where you live. Not all countries are collecting capital gains tax, and most have different tax rates as well as different laws and regulations regarding cryptocurrencies.
The general rule that applies in most 'crypto-friendly' countries is that holders need to calculate their gain or loss when they dispose of their crypto assets to figure out whether they need to pay capital gains tax or not.

[johnb1975442]

Ugh sorry 1st post rookie here!  I am in the USA.  So it sounds like the moment I sell and make a profit I will be taxed even if I don't cash out.  It's not a huge amount if that matters.  (around 30k)

[odolvlobo]

In the U.S., you pay taxes if you exchange it for anything else, whether dollars or another type of coin, and you don't pay taxes if you just move the coins.

[Stalker22]

Ugh sorry 1st post rookie here!  I am in the USA.  So it sounds like the moment I sell and make a profit I will be taxed even if I don't cash out.  It's not a huge amount if that matters.  (around 30k)

Yes. Selling a capital asset (in this case cryptocurrency) higher than the purchasing price results in a capital gain. These include: short-term capital gains (the result of the sale of capital assets owned for a year or less) or long-term capital gains (the result of the sale of capital assets owned for more than one year). Short-term capital gains are taxed as regular income, and long-term capital gains are subject to capital gain tax of 0%, 15%, or 20%.

You have everything nicely explained at: https://www.investopedia.com/articles/personal-finance/101515/comparing-longterm-vs-shortterm-capital-gain-tax-rates.asp

[marcbitcoins]

Depends on your country of origin. In the US, you do not have to pay taxes until that investment is realized. So whether you sell it or trade it for another coin, once that trade is done you would owe taxes for any gain (or a loss would get you a tax credit off what you owe - though this goes max out) I'm not a tax attorney so I highly recommend you speak to them to fully understand the system. In the meantime make sure you can keep track of all of the fees paid and the buy and sell prices of any coin you transact in.

[Lorence.xD]

Ugh sorry 1st post rookie here!  I am in the USA.  So it sounds like the moment I sell and make a profit I will be taxed even if I don't cash out.  It's not a huge amount if that matters.  (around 30k)

If you do not want to tax your bitcoin when you exchange it, try looking for P2P exchanges or sell it to someone in cold hard cash. AFAIK if you sell it physically I think that no one will be taxed since you and the buyer does not have an in between in your transaction. What I do not get is that if it is not a huge amount then why still tax it right? There should be a threshold where this X amount of bitcoin is not taxed.

[coolcoinz]

Ugh sorry 1st post rookie here!  I am in the USA.  So it sounds like the moment I sell and make a profit I will be taxed even if I don't cash out.  It's not a huge amount if that matters.  (around 30k)

If you do not want to tax your bitcoin when you exchange it, try looking for P2P exchanges or sell it to someone in cold hard cash. AFAIK if you sell it physically I think that no one will be taxed since you and the buyer does not have an in between in your transaction. What I do not get is that if it is not a huge amount then why still tax it right? There should be a threshold where this X amount of bitcoin is not taxed.

It's not that easy. If he bought on a registered exchange, especially if it was Coinbase or Gemini which report your every move, it's still possible for the government to track his sale and prove that he tried to avoid paying tax. The only way he can be safe is if he also bought on p2p or f2f from someone and sells for cash.

[Findingnemo]

Ugh sorry 1st post rookie here!  I am in the USA.  So it sounds like the moment I sell and make a profit I will be taxed even if I don't cash out.  It's not a huge amount if that matters.  (around 30k)

Yes you need to pay taxes for your capital gains because IRS treats cryptos as property so the capital gain tax rate maybe charged upto 37% under the current tax rate.

But there are people who is paying less taxes than actual with filing taxes so you need to find a professional and ask in detail about it. But if you are filing tax as single status then there will be no capital gains upto $40K.

[Lorence.xD]

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It's not that easy. If he bought on a registered exchange, especially if it was Coinbase or Gemini which report your every move, it's still possible for the government to track his sale and prove that he tried to avoid paying tax. The only way he can be safe is if he also bought on p2p or f2f from someone and sells for cash.

I did say that OP should try to go for a P2P, or maybe put the amount the OP wants to sell to a cold wallet and sell that wallet for X amount of cash. If its not that big of an amount I don't think that the government will bother you for taxes, you are already paying taxes some way or another anyway so I do not think that it is anything that they should worry about.

[Findingnemo]

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It's not that easy. If he bought on a registered exchange, especially if it was Coinbase or Gemini which report your every move, it's still possible for the government to track his sale and prove that he tried to avoid paying tax. The only way he can be safe is if he also bought on p2p or f2f from someone and sells for cash.

I did say that OP should try to go for a P2P, or maybe put the amount the OP wants to sell to a cold wallet and sell that wallet for X amount of cash. If its not that big of an amount I don't think that the government will bother you for taxes, you are already paying taxes some way or another anyway so I do not think that it is anything that they should worry about.

IRC, every peer to peer trading plaftorms stopped personal trades so the only option for US customer is like choosing a non banking payment method and common payment method on LBC for US customer is Paypal and its only suitable for amount less than thousand dollars.

[aysg76]

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If its not that big of an amount I don't think that the government will bother you for taxes, you are already paying taxes some way or another anyway so I do not think that it is anything that they should worry about.

Exactly you are paying taxes whenever you complete a trade. So you don't need to worry about tax.

[Findingnemo]

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Exactly you are paying taxes whenever you complete a trade. So you don't need to worry about tax.

Can you explain how exactly a trader paying his taxes by completing a trade?

There are different type of taxes even for the crypto trader and it varies depends on your country. You are not paying any taxes whenever you complete a trade, you have to file all your earnings from the trade at the time of reporting your income tax.

[Gozie51]

If its not that big of an amount I don't think that the government will bother you for taxes, you are already paying taxes some way or another anyway so I do not think that it is anything that they should worry about.

I think if a country does taxing and your amount is within the taxable amount, you will be taxed despite the amount. Meanwhile I think Op's transaction falls under capital gain tax for countries that tax on cryptocurrency gains. If it can be proved that his withdrawal is above initial investment capital, he can be taxed ideally.

[magneto]

Hi Folks!  I am a HODL'er and all of my bitcoin is on my Ledger wallet.  If I move it all back onto my exchange and sell it for a profit before the next big dip, then buy low a few weeks later and then move it all back immediately to my cold wallet, do I get taxed even though I am not cashing out?  Thank you all.

 

Yes, you would be technically disposing of your assets even though you are planning on buying back later.

If you want to avoid these tax implications, you should probably use derivatives to hedge against your positions as opposed to cashing them out on an exchange explicitly for cash.

For instance, when you want to cash out x amount of coin, simply short x amount of coin on margin on a platform like Bitmex/Deribit and close the short when you want to buy back. In most jurisdictions, doing this will NOT incur a CGT and will allow you to achieve the same effect as selling your coins - but you should still take it with a grain of salt and consult a tax agency.

[chaoscoinz]

Hi Folks!  I am a HODL'er and all of my bitcoin is on my Ledger wallet.  If I move it all back onto my exchange and sell it for a profit before the next big dip, then buy low a few weeks later and then move it all back immediately to my cold wallet, do I get taxed even though I am not cashing out?  Thank you all.

 

Disclaimer: I am not a legal or financial advisor. I am here to post my opinion on the matter. My opinion is not to be considered investment or legal advice nor does it constitute it. For legal or financial advice, please consult with your local professional!

If you happen to be Based within the U.S, then it doesn't matter whether or not you cashed out or not, the moment that a capitol gain or loss is realized, you have incurred a tax. Every Purchase you make and every trade with crypto could be considered taxable events. Here is an excellent podcast that consists of real attorneys and other experts who talk about everything tax and regulation related, pertaining only to cryptocurrency. https://talk.bitcoin.tax/