Steem Goes Through the Roof . . . . And the Taxman Cometh
Disclaimer: I am a systems architect, not a tax accountant. That said, the IRS's guidance is very clear . . . .
The Basics:
- Steem rewards *are* income, taxable at the value when awarded
- Steem sales (including conversion to another cryptocurrency) *are* taxed as property transactions, *NOT* as a currency
The Good News
If (like my son, @herpetologyguy) you slogged through the bleak winter of Steem prices in the teens and are now sitting on a nice pile of Steem -- you don't owe taxes on its current value yet, only on its value when you received it.
Further, you *can* designate which Steem you sell and doing so in a last-in-first-out (LIFO) method (or, even better, a "specific share identification" method selling the highest value at award first) will minimize your current tax bill (there's no denying Uncle Sam in the long run) when/if you sell Steem to pay your tax bill.
The Bad News
You *are* responsible for quarterly estimated taxes if (again, like my son, @herpetologyguy) Steem rewards (at the value when awarded) constitute a noticeable (not even major) portion of your income.
The Details
I will go over additional details (particularly those of sales strategies) in a subsequent post or two but -- fortunately, the nature of the block chain makes it easy to write a program/utility to determine and document what you've earned and give you options on which Steem you should sell based upon your tax planning (now vs. later). I will be doing so over the next couple of weeks and would love the assistance of anyone interested (particularly a UI designer and a tax accountant). Please comment below if you would like to join in.
Image Source: The Budgetnista Bog
It is only capital gains tax right?
No! The initial reward is standard income.
Buying Steem and then selling that Steem is capital gains.
The subsequent appreciation of your Steem after award is capital gains (at sale time).
But authors and curators are on the hook for the value of rewards (at award time) as income!
oh yea, but if you were in early the tax on such a low price is going to be much less than your capital gains.
Yes, but some people are now making hundreds of dollars per week -- and HOW you sell your Steem is really important
STEEM is income and SBD too...oh no the tax man will want how much of my 'income'. Oh no it's a joke right....TAX. Evil TAX.
@jerrybanfield I just saw your post https://steemit.com/steemit/@jerrybanfield/steemit-tax-calculation-and-payment-system
Would you be interested in helping me? Imagine if all the information could be pulled from the block-chain rather than you having to hand-enter it . . . .