Amount to safely transfer from exchange to hardware wallet

[JohnnyThePoo]

Hello All,

This is my first post, and I have been searching for a long time now to see if there is any limit in the amount of BTC that you can (or should) safely transfer from an exchange to a hardware wallet for cold storage.  I guess I am talking in terms of taxes.  For example, if I paid $1000 for 1 bitcoin which I bought on an exchange, and now that bitcoin is worth 10,000.  Would I be subject to capital gains taxes on it when I transfer it to a hardware wallet specifically for long term storage, and not to spend?  I know you are only subject to paying taxes when the BTC is spent, but will a transaction like this look like the BTC is being spent, therefore the exchange will report the transaction to the IRS?

When I bought the BTC there were no tax reporting regulations, then I got in a very severe accident and spent years in very severe pain, undergoing many surgeries, and recovering.  In this period of time I barely even opened my computer, and when I did, BTC were taxable and had increased in value quite a bit.  When I began to start learning about all of this, it was recommended that BTC not be left on an exchange, and especially when keeping long term, it should be transferred into a hardware wallet.  Now I can't figure out if I can transfer it without ending up getting taxed, or at minimum, having to deal with reporting the transaction on my taxes even if I don't get taxed.  So, any help is greatly appreciated, even if it is about another issue that could arise, that I'm not aware of.

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[jackg]

It MIGHT be reported to the local authorities for tax and other purposes but you're not expected to pay tax on something you wouldn't normally be expected to pay tax on.

It's like moving funds from one bank account to another, if the value is high enough then it'll get reported but you still won't have to pay tax unless a taxable event occurred (eg maybe you converted euros to dollars and then back and make a profit, or you sold your bitcoin and made a profit).

[JohnnyThePoo]

It MIGHT be reported to the local authorities for tax and other purposes but you're not expected to pay tax on something you wouldn't normally be expected to pay tax on.

It's like moving funds from one bank account to another, if the value is high enough then it'll get reported but you still won't have to pay tax unless a taxable event occurred (eg maybe you converted euros to dollars and then back and make a profit, or you sold your bitcoin and made a profit).

Thank you.  I thought so, but didn't want to do anything until I had some input, I appreciate it.

[NeuroticFish]

Now I can't figure out if I can transfer it without ending up getting taxed, or at minimum, having to deal with reporting the transaction on my taxes even if I don't get taxed.

Imho it should not matter whether you transfer or not those coins out, it should matter on when you bought and, much more important when/if you sell, since usually selling for fiat is the taxable event.
But, as a matter of fact we don't know for sure and the best advice imho would be to discuss with a tax related company/representative something, to be sure.

And while I find a very good move to (finally) get your coins to your hardware wallet (I hope that you've reset it after buying, I hope that you've checked the recovery phrase gets you the expected addresses), I think that your question is not really about technical support. Imho Bitcoin Discussion is more appropriate for this. (see bottom-left link for moving the topic)

[IIrik11]

i think it is better if u meet with a chartered accountant or tax official and ask these questions.

but my understanding of this is, as long as you don't sell the btc for cash you are not liable to pay any tax.

so, the btc you bought for $1000 may be worth $10000 but as long as you don't sell it and receive money in your bank account.

no tax should be required to pay but as i said it is better to ask someone professional.

[stompix]

I know you are only subject to paying taxes when the BTC is spent, but will a transaction like this look like the BTC is being spent, therefore the exchange will report the transaction to the IRS?

Since you're mentioning IRS we would assume you're in the US so just withdrawing coins from an exchange, moving them around while they are still on your property is not a taxable event. You will only pay taxes when there is a selling event or an investment one, including paying directly with bitcoin for some property, it doesn't have to be BTC > USD exchange.

One more piece of advice on top of what the others have said, keep a copy or proof of the purchase and fiat deposit (if still possible) you've done when you bought those coins, it will help you avoid trouble when you finally sell them and you'll be required to pay capital gains on those as you might be required at that time to prove the difference in price for your gains.

[ShowOff]

Capital gains tax in my opinion will only be levied when you sell your assets to fiat, and in this case you will not be taxed because you are simply moving bitcoins from one place to another "exchange to HW wallet". Also I don't think you should report any bitcoins you have in your HW wallet for taxes as the government will only apply taxes when you already have fiat on your trading or investment profits.

So, I can imply that you will be safe from taxes if you never sell your crypto to fiat but you should report a tax liability if you have spent it on fiat "depending on how your government makes the rules". If you are in my country and you trade on a licensed local exchange, then you will pay taxes automatically through the exchange for each of your sales transactions.

[Husires]

I don't recommend getting tax advice on the forum, ask a professional lawyer instead, whatever that costs.

It seems that you are talking about the United States, which means that every purchase and sale is subject to taxes, which means that you will not need to pay taxes unless you sell it and make a profit on it, and therefore transferring to the hardware wallet is not considered, in addition to that you are forced to transfer to the hardware wallet due to the step of keeping it in the wallet.

you can read in details from this link https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions

[Falconer]

For example, if I paid $1000 for 1 bitcoin which I bought on an exchange, and now that bitcoin is worth 10,000.  Would I be subject to capital gains taxes on it when I transfer it to a hardware wallet specifically for long term storage, and not to spend?

If you are using a centralized exchange, then there is a limit to the number of daily withdrawals you have to pass by completing KYC. I don't know what the maximum daily withdrawal limit is for final-tier KYC, but you shouldn't be taxed on it.

Taxes are mandatory if you convert your bitcoins or crypto to fiat, so if you withdraw your crypto to a hardware wallet then you may not be taxed. The simple example is the same as when you make a transaction between wallets where you move your crypto assets from wallet A to wallet B which in reality is not taxed.

[hugeblack]

According to  Form 8949^[1] you only need to the date of purchase, date of sale and calculate cost based on that. you dont need to report where you traded the coins, or how you've calculated your gains.
anyway you can follow this guide for more information ---> https://cointracking.info/guides/crypto_us_taxation/
and it is better to ask/read about taxs or reddit ----> https://www.reddit.com/r/CryptoTax/comments/re6jal/cryptocurrency_tax_faq/
Then you can legally reduce these taxes just like what happened here  ----> https://www.reddit.com/r/CryptoTax/comments/iu5kue/how_i_cut_my_crypto_tax_obligations_in_half_by/


[1] https://www.irs.gov/pub/irs-pdf/f8949.pdf

[JohnnyThePoo]

I really appreciate all the advice.  Thanks everyone for helping out!

[tranthidung]

There is a tutorial on tax and I think you will find something helpful from it, one way or another, even it does not completely solve your question.

• [Tutorial] Crypto taxes for beginners

jack is right. Tax is when you take profit into fiat. Otherwise, even if Bitcoin has its value to $1M, and if you don't take profit with your Bitcoin bought at $1000 or $20000, you won't be taxed. In reality, you don't have any profit at all if you don't cash it out to fiat. Profit you see in your account or wallet is not actual profit. 

[BitMaxz]

I really appreciate all the advice.  Thanks everyone for helping out!

Just adding this if you are living in the US you can only have tax if you sell your Bitcoin based on a Binance statement there is a Binance.us exchange they have a free tax statement portal where you can able to calculate all trades buy/sell but since you are going to sell it I'm sure you won't pay large tax after calculation.

Check this link from Binance.us below

- https://blog.binance.us/binance-us-launches-free-tax-statements-portal-for-the-filing-season/

[Welsh]

If ever in doubt, contact an accountant. Give them the details, and the transaction records, and they'll figure it out for you. Depending on where you live, they could only charge you something like £100 for filling the necessary paper work (self assessment) or they might just charge you for consultation if that's all required.

Tax can be complex at the best of times, but when you come to Bitcoin, the various laws that have changed over the years, then tax can become very complex quickly. I prefer the piece of mind knowing I've had everything verified, checked, and filed correctly. It's one of the only times I quite like the idea of using a third party for verifying things. Plus, it takes a considerable amount of time off my hands each year.

However, generally as users have mentioned when you've bought into an investment, only when selling that investment does it become taxable. If you received that money as income, it would be a different story, and be liable to income tax.

I don't recommend getting tax advice on the forum, ask a professional lawyer instead, whatever that costs.

An accountant would be fine. They deal with this sort of stuff all the time, and know tax laws inside out usually.