Buying with Bitcoin: A Capital Gains Inquiry.

[programmer3666]

It depends on your country, period.

Most countries, including the US, tax you on every exchange - not just when you cash out.

Say you bought BTC at $10k and
 exchange for ETH today when the BTC is worth $60k. You’ll have a $50k capital gain even though you don’t have any cash.

This is true also for purchase. Say you use BTC to buy a car, with the same values as above.  You’ll have a $50k capital gain on the purchase of the car. When you file your taxes after the end of the year (in the US) you’d report the gain and pay taxes.

Now, I'm wondering, if you continue with your example.
I bought bitcoin for 10 thousand dollars, then for this bitcoin I bought NFT token worth 50 thousand dollars.
( My profit is 40000 dollars )

Then I sold that NFT token for 10,000 dollars.
( My loss is 40000 dollars )

I have experience with tax returns and I understand that I can only report a certain amount of loss in a tax period and I will still pay tax, but how does this work in practice?

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I think the important point to consider is that If your losses exceed your gains in a given year, you can carry forward the excess losses to offset future capital gains. This simply means that you can deduct the remaining $40,000 loss from your future capital gains, potentially reducing your taxable income. Although The tax rate for capital gains depends on how long you held the asset. But I am not that much of a tax professional so it comes down to the law of the state or country.

[zasad@]

I think the important point to consider is that If your losses exceed your gains in a given year, you can carry forward the excess losses to offset future capital gains. This simply means that you can deduct the remaining $40,000 loss from your future capital gains, potentially reducing your taxable income. Although The tax rate for capital gains depends on how long you held the asset. But I am not that much of a tax professional so it comes down to the law of the state or country.

I understand that losses can be carried forward in a tax return, but I will tell you from my experience that tax returns with losses in my country go through additional audits. So if there is a possibility, it is better to show a small profit and get lost among many similar companies .

[AsiaHODL]

Hello all,

I have been trying to do some research on this for the past few days however between work and life I have very little time to dedicate towards gaining a concrete understanding. I am hoping one of you amazing people could enlighten me on this matter.

As I understand it, capital gains tax applies when you sell your coins as you have realized those gains and it becomes an income source that must be reported and payed appropriately in accordance with your local tax laws. My question is, if an individual uses their BTC to buy goods or services is that seen as a realized gain prior to the purchase of said product?
 

I apologize if this topic is tiresome or repetitive to the forum savvy, but feel free to ELI5 or if you have the time I welcome links to resources that I may do my own research and save you the energy.

Thanks in advance!

It would help if you specified which country you are referring to (and if in the US, what state). For the record, many of us here live in countries where no capital gains tax is paid on gains (in fiat terms) in asset valuations.