Cryptocurrencies are still a relatively new form of monetary value. Whether you trade and invest with crypto or use it to make purchases or settle debts, it’s important to know whether you have tax liabilities on your crypto holdings, losses or gains.
Currently, the tax laws surrounding crypto and how it will be treated in the future are a bit unsettled. The Internal Revenue Service is still debating about how crypto is to be treated, but for now, crypto is looked at as property. Additionally, you must report losses and gains on crypto investments to the IRS on your annual tax return. There are various forms available from the IRS to handle reporting of crypto, and new forms may be on the horizon that deals directly with cryptocurrency investments.
Changes in Crypto Technology
One of the reasons it remains difficult to pin down laws regarding crypto as it pertains to taxes is that crypto technology continues to evolve. At first, cryptocurrencies like Bitcoin were simply lines of code that were stored in virtual wallets. Over time, blockchain technology and smart contracts have made crypto trading and investing more complex, and tax laws may need to change over time alongside the evolution of cryptocurrencies.
Talk With a Tax Expert
Because laws and regulations are changing rapidly about cryptocurrencies, your best bet is to speak with a tax professional if you have any questions. A tax expert will be able to examine the specifics of your unique situation to provide advice and guidance to help you remain within the law.
You may also want to look into using a tax platform for crypto when filling out and filing your taxes. A tax platform for crypto will usually have the latest information from the IRS already programmed into how it handles data. Using such a platform will provide answers for your situation based on the information you input.
Disclaimer: The above is not intended to be tax advice. For the latest information about your tax liabilities, consult with a tax professional.
Read a similar article about US crypto capital gains tax here at this page.
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