Crypto 2023 🏆 How is Cryptocurrency Taxed?
Crypto 2023 | Crypto For Beginners | Crypto Tax
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Welcome to our Crypto 2023 Video!
When do you owe taxes on your crypto?
You incur a taxable event when you dispose of or earn cryptocurrency.
Anytime you incur a taxable event, you are realizing income that needs to be reported on your taxes.
Disposals include:
Selling your cryptocurrency
Trading your cryptocurrency for another crypto
Using your cryptocurrency to make a purchase
When do you owe capital gains tax on cryptocurrency?
When you dispose of cryptocurrency, you’ll recognize a capital gain or loss depending on how the price of your crypto has changed since you originally received it.
When do you owe income tax on cryptocurrency?
When you earn cryptocurrency, you’ll recognize income based on the fair market value of your crypto at the time of receipt.
Earning events include:
Mining rewards
Airdrop rewards
Staking rewards
Referral rewards
How much is cryptocurrency taxed?
Your personal income tax bracket and the holding period of your crypto assets (short term vs. long term) will determine how much tax (and what % of tax) you pay on your crypto income.
How much tax do I pay on long-term capital gains?
When you dispose of your cryptocurrency after 12 months or more of holding, you’ll pay long-term capital gains tax.
Crypto income tax events
When you dispose of your cryptocurrency after less than 12 months or earn cryptocurrency income, you’ll pay ordinary income tax rates.
How is crypto income taxed?
Remember, you don’t pay one flat tax rate on all of your taxable income. Instead, you’ll pay progressively higher tax rates on each portion of your income.
Letʼs say you made $25,000 in short-term capital gains from your crypto trading, and this was the only income you had for the year. Would you simply pay 12% of tax on that $25,000?
No. Instead of paying a flat tax on your entire income, youʼll pay different tax rates as you ascend through the income tax brackets. In this case, you only pay 10% on the first $10,275 and 12% on the next $14,725.
Tax-free cryptocurrency transactions
In certain circumstances, you will not trigger any taxable events when transacting with crypto, and you will not have to pay or report any cryptocurrency taxes.
Can the IRS track your cryptocurrency?
It’s often assumed that because cryptocurrency is anonymous, evading taxes is fairly easy. This is not true.
Major exchanges like Coinbase send 1099 forms to the IRS which contain your information and records of your crypto income.
The IRS can use the information that it receives from major exchanges to match ‘anonymous’ wallets to known individuals. In the past, the agency has worked with contractors like Chainalysis to analyze the blockchain and crack down on tax fraud.
In the future, the IRS will have even more information at its disposal to identify tax cheats. The 2021 infrastructure bill requires strict reporting requirements for American exchanges.
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The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading cryptocurrencies poses a considerable risk of loss. The speaker does not guarantee any particular outcome.
I hope you found value in our Crypto 2023 video. Make sure to leave a like on the video if you gained value from it!
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⏰Timestamps⏰
00:00 Coin Ledger Project Introduction
00:13 Coin Ledger Project
08:01 Coin Ledger Project Pricing
09:01 Coin Ledger Project Summary
09:52 Coin Ledger Project Outro