Cryptocurrency and Taxes
From a technical perspective cryptocurrency is very easy to trade. Sign up to an exchange, deposit some fiat currency, and with just a couple of clicks one can become the new owner of some Bitcoin, Ethereum, or another coin that has taken the world of digital investments by storm. But while cryptocurrency may be easy to acquire, did you know it’s a terrible headache to deal with tax-wise?
It’s true! And this applies especially to cryptocurrency transactions you make frequently. Whether buying, selling, or exchange (trading one crypto for another), when investing in crypto beyond there are a number of factors you really need to keep in mind, especially with the IRS’s new interest in it.
Cryptocurrency is treated as property. This means any profits you make are treated as a capital gain. While your currency may be innovative and digital, the IRS approach to it is historic and old school. You made money from the growth of value in a financial asset, and upon such time as the value of the asset is realized, the government will expect a cut of the profit.