Paying taxes for Crypto Gains

Paying taxes for crypto gains is the most recommended move. Don’t evade taxes. You might be trading on an exchange that doesn’t report to the IRS or you might want to take advantage of the lack of regulation in the space. As the market cap of crypto increases, be sure that the IRS is going to find out how to get their slice. And they will look into the past.

I am not a tax advisor. This is a simple overview of what I keep in mind as I trade. My accountant handles my taxes, and I advise you to get an accountant to do the same. Keep in mind that this is US-centric. You need to double check if this is the case in your country.

The taxable event is when you sell your cryptocurrency for fiat. In my case, it is when I sell BTC for USD. How much tax you pay depends on how long you were holding the cryptocurrency. This is important to know when paying taxes for crypto gains. Learn more about STS Crypto HERE.

Crypto that you hold for less than a year

Let’s split this into 3 transaction types.

Buy crypto with fiat – no tax. When I buy Bitcoin or another Altcoin with USD, I do not pay tax on that transaction.

Sell crypto for fiat – pay ordinary income tax. When I sell Bitcoin for USD, I am taxed using the FIFO (first in, first out) method of accounting. For example, if I buy BTC with an initial investment of $1,000 and a week sell the BTC for $1800, I’ll pay taxes on the $800 profit. Start trading today – Open a free account.

Buy crypto with crypto – unclear, but does not seem to be a taxable event. This is where things get foggy. Consult your advisor, but as far as I know this is a like-kind exchange which is not taxable but must be reported to the IRS. The exchange you use will output all of these transactions so you can hand them to your accountant.

Update: The IRS has clarified that a crypto to crypto exchange is not a like-kind exchange. The profit made from each transaction is taxed. More info here.

Crypto that you hold for more than a year

If you are holding a currency for more than a year it is classified as long term capital gains. Once you sell your Bitcoin or Altcoin for USD, you’ll be taxed at a rate of 15%.

This is another reason why I like keeping my net worth in Bitcoin. If I hold it for more than a year I only need to pay 15% tax whenever I decide to cash it out to USD. That’s a much lower rate than normal income tax.

The Tax Implications for the Average Cryptocurrency User

Putting aside the employer, when paying taxes for crypto gains, end of things and focusing on the average Bitcoin user, the tax implications of the above are:

1. If you trade cryptocurrency for a good or service, trading a cryptocurrency for a video game for example, then you need to keep a record and report every transaction, reporting the fair-market value of the currency at the time of the transaction. Or in the words of the IRS: “A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received.”
2. If you trade cryptocurrency as a capital asset, either for another cryptocurrency or fiat currency (like the US dollar), you need to keep a record and report those transactions (using the fair-market value of cryptocurrencies in cases where one cryptocurrency is traded for another). Then at the end of the year, you need to report all cryptocurrency transactions, and all the related gains and losses (and all transactions), and then pay taxes based on your total gains.

Ex. If you trade Litecoin for Bitcoin, that is a transaction that needs to be accounted for by reporting the fair-market value in US dollars at the time of the transaction. Likewise, if you trade Bitcoin to USD, that is a transaction that needs to be accounted for. Contact us to get free tips and guides for trading and taxes.

Bottom line on cryptocurrency and taxes in terms of reporting: You need to keep a record of your trades, transactions, and holdings, tally your profits and losses from selling/using/trading crypto, report that to the IRS at tax time (potentially also filing quarterlies), and then pay your capital gains taxes along with your other taxes. If you make a good faith effort to report and pay, then the worst your likely to see is a fee if you get it wrong, if you try to hide your funds, you could get in trouble. Exchanges typically don’t provide all the information you’ll need for reporting, so it is advised that you keep your own records.

Paying taxes for Crypto Gains – Notes

Below are some notes on cryptocurrency and taxes. When paying taxes for crypto gains.

On stable coins: A stable coin is a bit like a mix between a dollar and a crypto, and thus it logically has some tax implications worth considering in that respect. Although the IRS never issued any guidance specifically on stable coins, logically speaking, for tax purposes trading in and out of a stable coin is a taxable event.

If you hold a stable coin that is valued at exactly $1, and you bought it for exactly $1, you have no gains or losses on it when you trade out of it (and thus converting it to dollars or buying a crypto with it should have no impact on taxes). However, when you trade into a stable coin it is like trading to dollars (like selling) and if the price of the stable coin fluctuates and you gain or lose money in the process you have to report the appropriate gains or losses.

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Watch out for this trap: If you make a gains one year, but then lose them before tax time the next year, you’ll owe the IRS money you don’t have on those gains (unless you and your accountant can make a specific and reasonable case otherwise; although this might not work).

Keep records: It is smart to keep your own records when paying taxes for crypto gains. . Cryptocurrency exchanges (like Coinbase/GDAX) generally keep records for you. However, if you have records, you should use them (or at least verify the exchange’s records using yours).

Know How the Tax System Works: The U.S. has a progressive tax system and a pay-as-you-go tax system. If you trade frequently, you’ll probably owe a higher rate and have to make quarterly payments. Meanwhile, those with low incomes and small long-term gains can end up owing no capital gains tax at all; those with capital gains of less than $1,000 in a year likely won’t have to file a quarterly. 

An example of a taxable event / realization event: As noted, when you spend a Bitcoin or other crypto, for example on a good or service, that is a “realization event” (same as trading crypto to crypto or crypto to fiat). At that point, you owe the capital gains tax on the fair market value of the goods or services provided. So if you bought $100 worth of pizza for 1 bitcoin, and you bought the bitcoin for $110, you lost $10 and would tally that loss (or, if you paid $10 for the Bitcoin, you realized $90 in gains and would tally that). When buying goods and services, you may also owe other taxes like the sales tax. Likewise, if you use crypto in business, you could owe other taxes (like payroll or state and local taxes) as well.

On using crypto for your business or mining: In general the same basic rules apply when using crypto as a business or when mining (that is, you tally capital gains when you convert the crypto back dollars or another crypto when paying taxes for crypto gains). However, there are special considerations for mining and business use. We don’t cover every aspect of crypto for business and mining on this page, so if you have a lot of transactions as a business or miner please see a tax professional.

What exactly is being reported: To be clear you need to report the dollar value of each trade and/or transaction throughout the year at the time of the trade. So if you traded BTC to ETH once, you need to go back and figure out the dollar value of that trade. That trade is then considered a capital gain or loss depending on if you made or lost money.

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Best cryptocurrency trading strategies? The cryptocurrency craze has become the talk of this year. More and more people are finding the Blockchain technology exciting and profitable. In order to become successful in the crypto-world, understanding what the market is about and adhering to a skill set of trading strategies is necessary. If you need you may start in our first guide on what is Bitcoin.

Trading strategies are there to provide objectives for traders to earn more with lesser capital, its just like how a successful business should operate. Real trading strategies should be based on quantifiable specifications that can be analyzed based on old data which can be used for future trading scenes. Also you can find more information about us here.

When it comes to trading and investment of digital currencies, there are a few straightforward things an investor needs to understand first, they are mentioned below; Start trading today – free account.

1. Understand blockchain – You don’t need to understand the technical complexities, but a basic understanding will help you respond to news and announcements that may help you predict future price movements.
2. Find out what’s growing – Bitcoin, Ethereum and Litecoin top the list for tradability and ease of use. However, there are also Zcash, Das, Ripple, Monero and several more to keep an eye on, so do your homework, take your time and perform an understudy, find out which is more profitable to you and focus your attention there.
3. Embrace volatility – Cryptocurrencies are famously volatile. This invariably means the risk is high, it also means the potential for profit is great too. It’s always sensible to check the volatility of the exchange you decide to go with.

Moving forward, one of the best cryptocurrency trading strategies ways to approach the trading world is with an open mind, be ready to learn as no knowledge is lost and being grounded in all there is to know in the crypto world would help investors minimize risk while trading. A good strategy is to find arbitrage on different exchanges. Ignore the trollbox, it’s called troll for a reason. Enjoy the best cryptocurrency trading strategies.

SO what are the ultimate cryptocurrency trading strategies for both beginners and experts?? Here is a link to our cryptocurrency trading platform. You can open a new account for free and receive daily tips from professional traders.

1. Learn as much as possible; knowledge is power, investors should take the time out to learn about all the crypto jargons like HODL and dynamics like “pump and dump” also get an understanding of the blockchain technology.
2. Trading bots; If you are not able to understand the difficult technology behind Blockchain technology, you should start using a trading bot with API enabled will help do the trading for you. This is one of the best cryptocurrency trading strategy for amateur traders.
3. Long/Short; When a trader is in a “Long” trade this means that they have bought something and are hoping that the price will go up to make a profit. On the other hand, when a trader is doing “Short” trades this means that the trader sells what they have in hand.
4. Swing Trading Strategy – Swing trading is somewhere in the middle of Day Trading and Trend Trading. This is because Day Trading is holding an asset from a couple of seconds to a few hours but never more than a day while Trend Trading is when the trader looks for a longer timetable and keeps the asset for weeks running to months, Swing traders however hold an asset for a couple of days up to a few weeks.
5. Scalping; is trading strategy that is the most active one to date, here a trader that follows scalping takes advantage of smaller gains but on a larger scale. Thus multiple entries and exists will pile up and make a hefty sum.
6. Day Trading; this is a strategy that involves the buying/selling of assets within the same day. Day trading cryptocurrency has boomed in recent months, high volatility and trading volume in cryptocurrencies suit day trading very well. Day traders try to utilize special short-term course fluctuations, in the crypto space this brings them profits between one and three percent.
7. Trading on the News; trading on the news simply means trading in times where something “happens” like a natural disaster or even a terrorist attack that forces the asset to plummet. Buying at this time is the cheapest since everything goes down so fast but would also have a greater risk of not going up again due to involved instances.
8. Diversifying your portfolio; the most effective strategy for minimizing risk in trading cryptocurrencies is diversification. A well-diversified portfolio consists of different types of securities from diverse industries, with varying degrees of risk, even though diversification can’t guarantee against a loss, it is the most important component to helping you reach your long-range financial goals, while minimizing your risk.
9. The HODL; HODL in the crypto world means holding onto your cryptocurrencies when things are not going as planned.
10. Buying at the right time; one of the basic strategies that you can look into is buying at the right time. It is natural to buy cheap when there’s a surplus of assets lying around, the challenge here is to know when the supply is greatly ahead of the demand. Understanding this means that profit can be easily made with the gap between the cheap purchases an expensive sell.
11. Perform Technical Analysis; history has a habit of repeating itself, so if you can get acquainted with a pattern you may be able to predict future price movements, giving you the edge you need to turn an intraday profit. So analyze historical price charts to identify telling patterns.
12. Study Metrics; this is another very important cryptocurrency strategy where looking at the number of wallets vs the number of active wallets and the current trading volume, you can attempt to give a specific currency a current value in which you can then make informed decisions based on today’s market price. The more accurate your predictions, the greater your chances for profit.
13. Install a price ticker; a price ticker will alert you whenever the price fluctuates. So, it’s better to install on your phone and depending on the price, you can make wise investment decisions. Always observe the market capitalization as that is an eminent factor, this is one of the common day to day cryptocurrency trading strategy. Find best cryptocurrency trading strategies.

There are also a few mistakes investors tend to make which could lead to great loss, having knowledge of these mistakes would help beginners and even experts to learn from previous mistakes as we look at them below:

1. Chasing pump and dump schemes; Pump and dump is a scheme that boosts the price through recommendations based on false, misleading or greatly exaggerated statements. Investors are adviced to avoid such schemes.
2. Falling for phishing scams; Falling for an email scam is something that can happen to anyone no matter how careful one gets sometimes a simple distraction or even anxiety can lead to one falling for such scams. Phishing scam involves using email and fraudulent websites to steal sensitive information such as passwords, credit card numbers, account data, addresses, and more.
3. Losing your private key; this may be the greatest mistake in the crypto community till date. Losing private keys will waste all your money as you can’t do anything if you have forgotten the password. An investor should never lose their keys.

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These are the cryptocurrencies tricks which should help you become an informed investor. It will save you from making silly decisions and at the same time, never ever dare to commit any of the crypto blunders as mentioned above. Find the best cryptocurrency trading strategies.

Conclusively, trading strategies have been practiced since the first human civilizations was formed. This means that even though we have converted them to our current trading market, the basis of everything is still bartered trade. What this invariably means is that no matter the number of trading strategies out there the basic idea is to adopt the one that you understand and helps you maximize profit as well as manage risk. Best to learn best cryptocurrency trading strategies with STS Crypto.

Refer to this as your guide to day trading cryptocurrency and you’ll avoid most of the hurdles many traders fall down at, when choosing your broker and platform, consider ease of use, security and their fee structure these are very important. And whichever trading strategy you opt for, make sure technical analysis and the news play important roles. Finally, keep aware of regional differences in rules and taxes, you don’t want to lose profit to unforeseen regulations.

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