Textbook Tax

Cryptocurrency transactions, while anonymous and decentralized, are subject to regulation by the IRS for all US taxpayers. Because of this, no matter your level of knowledge or complexity of dealings, if you have or plan to participate in any activity involving cryptocurrency, please continue reading to learn about the common taxable and non-taxable cryptocurrency transactions. By understanding how the United States taxes each crypto-related transaction, you will be a better crypto investor and trader and have a better understanding of your tax bill come tax season. Let’s start discussing the taxable and nontaxable cryptocurrency transactions based on US regulations. Crypto Tax: Taxable Transactions The following crypto transactions trigger capital gains or losses and may result in capital gain tax owed based on your capital asset activity. 1. Sell cryptocurrency for real currency When you sell cryptocurrency for USD, you have made a taxable crypto transaction. In other words, if you e...

The cryptocurrency market continues to rise in popularity in the U.S. and throughout the world. The decentralized finance ("Defi") sector has seen massive growth. Additionally, ease of access has increased as new and established companies offer crypto services and exchanges. As more and more individuals and institutions adopt cryptocurrency, it becomes more important for people to understand the tax laws and regulations governing the cryptocurrency industry. It is important to note that each country views and regulates virtual currency differently.  The scope of this article covers the crypto tax laws in the United States.  T he IRS defines virtual currencies as  digital representations of value that function as mediums of exchange, units of account, and/or stores of value. Further, t he U.S. views crypto as property subject to capital gains and losses for US federal tax purposes. Based on its designation as property, i n general, there are four taxable events when d...

As virtual currency trading and ownership continues to grow, the U.S. regulatory policies and guidance remain vague, confusing, and inconsistent. However, based on current law, tax planning methods exist to help you lower your crypto tax bill. In the current regulatory environment, a tax loophole, or a tax planning strategy to legally reduce your tax liability, exists for crypto traders. The tax strategy focuses on the applicability of the Wash Sale rule as it relates to trading cryptocurrencies. It is important to note that the regulatory environment surrounding virtual currency is rapidly evolving, and so, crypto traders should remain up to date on newly released crypto guidance and policy. Below, I will detail the wash sale rule as it relates to trading crypto as well as explain the tax strategy for lowering your cypto tax bill. Every crypto trader should know the wash sale tax tip. Related Posts -   Cryptocurrency Taxation: How does the U.S. tax cryptocurrency? -  Ta...

In October 2019, the IRS released additional guidance on the tax treatment of virtual currency transactions. The IRS released the guidance in the form of a Revenue Ruling (Rev. Rul. 2019-24). The revenue ruling provides further guidance relating specifically to accounting for, valuing, and reporting virtual currency. Additionally, it is important to note that the following guidance relates only to taxpayers holding cryptocurrency as a capital asset. Below, I will detail several tax rules surrounding virtual currency transactions, including recognizing a virtual currency transaction, valuing a virtual currency transaction, and reporting a virtual currency transaction. If you buy, hold, and/or sell cryptocurrency, it is essential to have a strong understanding about virtual currency tax law to avoid paying tax penalties. Related Posts: -  Rental of Residence: How to rent your house tax-free? -  Gambling Winnings & Losses: How to report gambling income and losses -...