Taxes of Crypto: What to know?

Cryptocurrency taxes are becoming more common in many parts of the world. For example, when you earn profits from trading cryptocurrency, you ought to be taxed an amount of that profit. You can also get taxed for holding, staking, or gifting coins to your friends.

Nowadays, Bitcoin can be tracked easily through the blockchain. It is not as anonymous as before. If you purchase Bitcoin on exchanges that require you to do KYC, it is easy to track your transactions and pinpoint your identity. With this in mind, it is essential to learn your country's take on cryptocurrency taxes and make sure you are not breaking any laws.

This article will provide some insights into taxation regulation on cryptocurrency for a few countries. For more details, please find reputable sources from your country.

Crypto taxes in the United States of America

If you live in the USA, you may be due to pay short-term capital gains tax for your recent profits made in crypto. This comes at the same rate as your usual income tax bracket. However, if you made a loss, you can have up to $3,000 in tax reduction, with excess carrying over to later years. If you have been trading for a long time, you may be liable for long-term capital gains. This depends on your household income. The long-term capital gains tax is lower than the short-term gains. You can get a lower tax if you can prove that the crypto you sold was older than a year. 

If you use a cold wallet like the ELLIPAL Titan to secure your coins, you can easily create multiple accounts on one wallet to easily organize your portfolio for the short term and long term. 

As note, it's not just exchanging crypto for fiat that needs to be reported. In the US, you also need to declare for the following points:

  • Exchanging to another currency:This is calculated based on the dollar value gain. For example, if you bought 0.3 Ethereum bought for $100 and sell it for $500 worth of Bitcoin, you will need to pay tax for your gain of $400.
  • Using crypto to buy products:You will be taxed based on how much you paid for the crypto and the value of the purchased product. 
  • Selling crypto through other means:Mining, airdrops, DeFi farming are all considered income and have to be taxed.

Crypto taxes in Europe

In the EU, each country has different crypto tax rules. However, some countries in the EU give a fair reign over cryptocurrency taxes. For example, Germany does not expect you to pay tax for long-term capital gains for funds held over a year. Malta, Slovenia, Switzerland are also lenient to long-term investors. While countries like Portugal and Belarus are aiming to attract more investors by barely taxing crypto.

Paying your taxes

Although you might not be sure if your country is taxing crypto or not, it is better to keep a good tab of your transactions so you can easily refer to it when you have to calculate your taxes. Many expert traders use a simple spreadsheet to record their trades and calculate their gains or loss. Even if you are not obliged to pay any tax, it is also good to keep tabs on your assets.

If you use the ELLIPAL Cold Wallet, you can easily create multiple accounts and organize them based on the purpose of your trade - for example, long-term, short-term, or high-risk investment. This way, it is also easy to calculate your taxes.

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