If you buy 1 bitcoin and hold for years in your own offline wallet, taxes?

[tertius993]

You pay when/if you ever cash out. Many people got BTC for free in the early days, do you expect them to pay taxes if they don't use them yet?

This.

You only pay tax when you convert back into cash (at least in the UK).

It's the same as any capital gain, such as property. You only pay tax when you sell for cash.

Else how do they calculate exactly how much to tax you?

It is good for the OP to bring this up though, as it isn't instinctive to understand.

Thee bit in bold is not correct - in the UK any disposal is potentially liable for tax, including crypto to crypto disposals. See here: https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-for-individuals

[Vishnu.Reang]

It is all about what if buy BTC for $1000 and want to sell it for $50000.
But I am wondering, what if he buy now at $34000 and after one year they want to exchange it on fiat, but then Bitcoin worth $20000. Whether in that case, he can claim the tax back because it has lost the value of the investment. But he paid tax on $34k amount.
It can be a rhetorical question.

Tax on capital gains can be reduced by adding in capital losses. I am not sure whether this can be done in all the jurisdictions. So if you have $30,000 gain from one trade, and a $15,000 loss from another, then you need to pay tax on $15,000 only. Then also, there is something called FIFO (first-in first-out). Let's say that you have purchased Bitcoin multiple times. The first purchase was made when BTC was trading at $1,000. Then you made multiple purchases until the exchange rate went up to $35,000. And you sold a few of your coins for $35,000. Here you can't claim that the purchase price was $35K. Under the FIFO principle, you need to take the price of the first purchase for capital gains calculation.

[adzino]

No, they won't know. But in the future, it's going to be really hard for you to convert it to fiat (if you do it all at once). You might be asked questions and source of funds. And if they decide to investigate, chances are you might get caught since you are using Coinbase. You already did your KYC and bank transfer which created paper trails. And don't forget Coinbase is very compliant to the law enforcement department.
Know your laws before you do anything.

[AicecreaME]

<...>

Bitcoin is an openblockchain, nothing is hidden.
Any Exchanges that lets you cash out, in the US will report you to the IRS.   (KYC/AML)
Plus it is not like they don't monitor bitcoin addresses on the block explorers for large transfers.
https://www.bankinfosecurity.com/irs-seeks-fresh-ways-to-trace-cryptocurrency-transactions-a-14992

If you try to pretend like you mined it, then you are liable to pay income tax on it for the full amount.
If you are honest and don't hide you purchased it, you are able to only pay long range capital gains tax on the profit.

* If you sell/trade bitcoin in 2021 , your taxes are due by April 15, 2022. in the US. *
* If you are only buying/holding and not selling/trading, you owe nothing as no gains or losses have been finalized.*

* Trump signed a law ending like of kind exchanges for crypto, meaning that trading bitcoin for any altcoin or product or service is no longer excluded from taxation, and will be taxed as if you had just sold it. *
After this law was passed , trading bitcoin for litecoin or dogecoin or vice versa became a taxable event on US exchanges.
Only Real Estate transactions still evade taxation with the like of kind exchange.
IE: Trading Real Estate for other Real Estate.

* Note the above is US only, other countries differ.*

Exactly.

They can still track the address that you've used on receiving your Bitcoin that you bought from coinbase. But I'm just wondering if the Electrum bitcoin address is traceable as well since every time you refresh it, it gives you a new Bitcoin address, however, you could still use the old one. I think even if you use the new one, it'll be connected to the old Bitcoin address so your transaction will still be visible, sorry for being Off-topic a little bit.

To make it short, cryptocurrency being regulated is a real problem to those who don't want their money to be reduce because of taxes made by the Government.

[AGD]

Wait until you can buy everything with Bitcoin.

[davis196]

Your question would be more interesting,if we add a BTC mixer into the equation.
All the other members are right about having to declare capital gains and pay capital gains tax after selling your asset.But what about buying Bitcoins,moving those Bitcoins thru a BTC mixer and sending them to a cold wallet.Then,after the Bitcoin price reaches 50K USD you just sell those BTC in a non-US crypto exchange platform(that doesn't have KYC) or some decentralized exchange like Holdhold or Bisq.
What will happen then?Will the IRS find out that you have Bitcoins?

[StartupAnalyst]

Ten years later you can trade BTC on another exchange market. You can register on Binance or Bittrex or somewhere else and trade there your BTC. Though, Blockchain is a transparent machine that offers users an opportunity to look through the history of all transactions. As far as I know, if you keep BTC on your digital wallet (like ledger) you don’t pay tax for holding crypto and for grains you get. You pay fee in case you again move on cryptocurrency market, exchange crypto on fiat there, move your coins from wallet to wallet, etc.