Crypto Goes Mainstream This Tax Season

CRYPTOCURRENCY GOES MAINSTREAM THIS TAX SEASON IN THE USA

Until very recently, most cryptocurrency investors didn’t know or did not care to pay taxes on the capital gains that they accumulated purchasing and selling digital coins. The cryptocurrency community is now facing a hard fact: they have to pay taxes just like all the rest of us.

Virtual monies burst onto the investment scene this past year, due in large part to the astronomical rise in the popularity of Bitcoin and its numerous successors. Interest in this thrilling new investment shows no signs of slowing, and shortly cryptocurrency will be as ubiquitous as the other traditional securities traded every day on Wall Street.

Until quite recently, but most cryptocurrency investors either did not understand or did not care to pay taxes on the capital gains that they accumulated buying and selling digital coins. The cryptocurrency community is presently facing a hard truth: they have to pay taxes just like all the rest of us.

The attention that virtual currencies are getting from federal and state regulators is a positive indication that this innovative technology is heading towards the mainstream. Of course, it has a long way to go until it gets there. In the meantime, however, cryptocurrency investors need to accept the truth of growing government supervision.

PAYING CRYPTOCURRENCY TAXES IS A MUST

Bitcoin emerged out of an anonymous source much about the fringes of the internet almost a decade past. For a time, cryptocurrency traders appreciated an investment environment free from government oversight.

Tax liability for virtual money investments is still a bit of a gray area in several respects, and new legislation and laws are pulling out the boundaries. However, 1 thing is absolutely clear: if you exchange cryptocurrencies, you have to report your action to the IRS.

To the great dismay of several ancient digital currency investors, the IRS declared virtual currencies to be taxable funds assets back in 2014. The tax rate is dependent upon how long you held your coins until you offered them, in addition to the price you bought in and the price you sold out.

In other words, the same principles apply to cryptocurrency investors as taxpayers that trade stocks and other securities. This sounds easy enough for any experienced dealer, but sadly, things in the cryptocurrency world tend to get complex quickly.

Most securities are used only in straightforward buy-and-sell transactions. However, cryptocurrencies can also be intended to be used to buy goods and services. Contrary to the popular belief — and wishful thinking — of many cryptocurrency investors, cashing from your digital currency investments isn’t the only economic occasion in the lifespan of your investment. Instead, tax liability arises whenever cryptocurrencies are traded for different coins, cashed into fiat currency, or used to buy goods and services. So, for example, if you purchase a new sofa on Overstock.com using bitcoin, your purchase will be subject to capital gains tax in addition to any sales tax which may apply.

PAYING CRYPTO TAXES USING CRYPTOCURRENCY

This sort of double-taxation introduces a true obstacle to the integration of cryptocurrency into retail payment systems. Luckily, however, it is not bad news. Only last week, the Arizona State Senate passed a bill allowing taxpayers to cover their state income taxes utilizing “Bitcoin, Litecoin, or some other cryptocurrency” allowed by the state revenue department. While the bill still needs to go through the Arizona House of Representatives before it becomes a law, it represents a milestone moment in the cryptocurrency world.

The Arizona bill was received with a mix of enthusiasm and skepticism. On one hand, the inherent worth of cryptocurrencies remains up in the air. Virtual monies have become legendary because of their own volatility. The price of Bitcoin more than doubled in the past two weeks of 2017 before falling to half of its value in the first fourteen months of 2018.

On the flip side, the blockchain technologies which supports the digital money market is a radical innovation with the capability to alter how people use money entirely.

It’s a bold legislative move that may be tossed aside by the state’s more conservative House of Representatives. But, it’s also a indication of these times. Arizona recognizes the possible value of virtual currencies as a technology, not simply a security or replacement for conventional cash.

As a result, the state is posturing itself as a cryptocurrency-friendly marketplace in anticipation of greater adoption of digital currency technology and its derivatives. While the long-term viability of any digital money remains to be seen, the integration of cryptocurrency into government revenue flows is a positive indication for the future of this exciting new technology.

https://www.bitcoinmarketinsider.com/crypto-goes-mainstream-this-tax-season/