With cryptos rising to the level of increased uptake in the US market, investors are now better placed to stake their ground in the many taxing complexities and regulatory requirements associated with the increasing value of cryptos. Here is a beginner’s guide breaking down key taxation aspects and other necessary tips about US crypto regulations and taxation.
Under these US crypto regulations, the IRS considers cryptocurrency property rather than any form of money. This being said, their buying and selling, exchanging in accordance with their US crypto regulations. Of course, were they to file for tax-reporting purposes against the IRS? Here are their taxable cryptocurrency transactions:
1. Taxable cryptocurrency transactions
It falls under these provisions of their US crypto regulations:
- Buying cryptocurrency to fiat currency (USD) Purchasing one cryptocurrency in exchange for another
- Selling your cryptos to buy something or for services
- Accruing your crypto by mining, staking, or airdrops
These sources of income are either short-term or long-term capital gains, depending on the holding period.
2. Record Keeping
Record-keeping is the second-most important practice when operating within the US crypto regulations. These include recording the following:
- Date of the transaction
- The price at which it was bought and sold
- Wallet address
- Exchange fee
You can either use crypto tax software or hire a tax professional to make it easier.
3. Offset Gains with Crypto Losses
Another strategy under the US crypto regulations includes tax-loss harvesting. It lets the investor reduce his or her capital gains with losses he or she incurs that diminish his or her tax burden. That strategy would work much more profoundly during a bear market as well.
4. Reporting Crypto on Tax Returns
All US taxpayers have to report their activities with cryptocurrencies. The IRS directly asks questions related to crypto transactions. They face an audit or penalty if they don’t, so at the time of reporting wrongly regarding income related to cryptocurrencies.
5. Pay Attention to Blockchain Regulations Trend
The US landscape of crypto regulation is always moving. New proposed legislation and blockchain regulation trends can change a way of how crypto assets might be taxed, so investors can stay up with current events at reputable sources, such as Blockchain77, so they are constantly in compliance.
Honestly, crypto taxes in the USA are not exactly a walk in the park. However, keeping abreast with US crypto regulations would keep one out of trouble. The best thing to do concerning crypto taxes, therefore, is to keep great records, perform tax-loss harvesting, and get updated on what’s going to happen in regard to blockchain regulations.
Stay proactive and informed to steer clear of unnecessary tax issues while keeping your crypto investments optimized.