Used to calculate taxes due on holding cryptocurrency! IRS releases first crypto tax guidance

The IRS releases its first crypto tax guide

According to recent news, the US Internal Revenue Service has released its first crypto tax guide, providing a detailed tax reporting instruction for those who hold cryptocurrency. This guide is important for investors trying to sort out cryptocurrency tax matters, as it will allow investors to figure out the specific circumstances in which they need to file a tax return. Next, we will interpret this guide in detail and reveal the knowledge points for everyone.

Tax Treatment of Cryptocurrency

IRS guidance provides a clear definition of cryptocurrency, defining it as a “virtual currency” and treating it as a type of other property or asset. This means that any gain or loss resulting from the purchase, sale, exchange or other transaction of cryptocurrencies is subject to capital gains tax or loss. For goods or services paid for in cryptocurrency, the corresponding value needs to be calculated at the time of exchange, and this value will later be used for tax returns.

Tax Liability

If you hold cryptocurrency for more than 1 year and sell it, then it will be considered as "long-term capital gain" and if you hold it for less than 1 year, it will be considered as "short-term capital gain". In both cases, appropriate taxes will need to be paid. In addition to predicted gains and losses from buying and selling cryptocurrencies, holders of cryptocurrencies are required to report to the state each year the amount of cryptocurrency and the value of the currency at that time.

Special Case

If you are a cryptocurrency "miner", you can get paid for mining new cryptocurrencies. This form of income is considered a form of freelance income tax and is also subject to tax filing. Additionally, if you receive rewards from “airdrops” from certain cryptocurrency networks, you will also need to pay capital gains tax.

Things to note

For those who hold cryptocurrency for buying and selling, be sure to always record the details of each transaction, including the date of purchase and sale, the amount, and profit. These records can play a very good supporting role when filing taxes. In addition, for those miners or those who receive rewards from airdrops, the details of each income received will also need to be recorded and associated with the corresponding monetary value.

Conclusion

Just like other asset classes, cryptocurrencies are subject to taxes. The crypto tax guidance issued by the IRS provides investors with the necessary guidance to better understand and handle these tax matters. Investors should pay attention to this and complete relevant tax declaration and payment work on the premise of being reasonable and legal.

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