For more information, check out our guide to DAO taxes. Most countries around the world tax cryptocurrencies similarly to the US (though there are minor differences). Cryptocurrency exchanges like Coinbase, Binance, and others often do not have the ability to provide their users with accurate capital gains and losses tax reports. How do other countries handle crypto taxes? This is not a fault of the exchanges themselves, it is simply a product of the unique characteristics of cryptocurrencies-namely their transferability.
Crypto Trading Volume
If you’re planning on holding your cryptocurrency for the long-haul, a cryptocurrency IRA can be a great option. Donating cryptocurrency is a great way to make a positive impact and claim tax benefits. With a self-directed IRA, you can hold cryptocurrencies and dispose of them on a tax-free/tax-deferred basis once you’re near retirement age. Donating cryptocurrency is not subject to capital gains tax, and you claim a tax deduction based on the value of your donation!
HIFO: HIFO is highest-in first-out.
The first cryptocurrency you acquired is the first you dispose of when calculating your gain or loss. With this method, the last cryptocurrency you acquired is the first you dispose of. LIFO: LIFO is last-in first-out. LIFO can help you save money on taxes in a period of rising prices. HIFO: HIFO is highest-in first-out. FIFO is considered the default method for most investors. If you choose a ‘specific identification’ method like LIFO or HIFO, you’ll need to specifically identify each individual unit of cryptocurrency. With this method, the highest price cryptocurrency you acquire is the first you dispose of.
In the near future, the IRS will have even more information at its disposal to identify tax cheats. Over the past several years, the IRS has aggressively cracked down on cryptocurrency tax compliance issues. As cryptocurrency adoption accelerates, it’s likely that we’ll see more cryptocurrency tax audits and tax prosecutions. The IRS can enforce a number of penalties for tax fraud, including criminal prosecution, five years in prison, and a fine of up to $250,000. What happens if you don’t report your crypto taxes?
For more information, check out our guide to cryptocurrency margin trading taxes. How are crypto gifts taxed? Gift taxes are not imposed until the gift-giver has gifted away over $13.61 million dollars in their lifetime. Generally, cryptocurrency gifts are tax-free for all but the most generous gift-givers. However, if you send a gift or gifts with a fair market value above $18,000 to any individual in a year, you will need to file a gift tax return in addition to your traditional tax returns. If you are feeling generous, you can send a cryptocurrency gift to a friend or family member without having to worry about paying additional taxes. Even then, the gift recipient will never have to pay taxes for merely receiving the gift.