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Guide To Crypto Taxes: How Do Crypto Taxes Work?

The post Guide To Crypto Taxes: How Do Crypto Taxes Work? appeared first on Coinpedia – Fintech & Cryptocurreny News Media| Crypto Guide

With the expansion of cryptocurrency throughout the globe, more and more investors are diving into the crypto space. Also, as the IRS brings out new tax compliances, it is very easy for investors to get confused. So a clear understanding of crypto taxes becomes all the more important. Taxability Of Cryptocurrency In 2014, the Internal …

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With the expansion of cryptocurrency throughout the globe, more and more investors are diving into the crypto space. Also, as the IRS brings out new tax compliances, it is very easy for investors to get confused. So a clear understanding of crypto taxes becomes all the more important.

Taxability Of Cryptocurrency

In 2014, the Internal Revenue Service (IRS), in their Notice 2014-21, made a decision that Bitcoin and other cryptocurrencies will be treated as an asset similar to ‘property’, rather than currency. This simply means that similar to traditional stocks and assets, even crypto earning will qualify as capital gains and income gains, depending on the activities these digital assets undergo.

What Are Some Of The Taxable Events In The United States?

As mentioned above, some of the activities involving digital assets are considered capital gains, whereas some are considered as income.

Capital Gains Tax

Capital gain tax is the federal fee you pay on the profit that you have earned on an asset whose value has appreciated over the holding period. Profits on cryptocurrency can be earned in the following taxable events:

  • Sell cryptocurrency (Bitcoin, Ethereum, Ripple, etc.) for fiat currency (Dollars, Euro, Yen, etc.)
  • Trading one crypto for another, either P2P directly or on an exchange
  • Purchasing goods and services using cryptocurrency

Income Tax

When an individual earns an income from cryptocurrency. Some of the taxable events under income tax are:

  • Receive crypto via airdrops
  • Crypto earnings from DeFi lending
  • Bug bounties received for carrying out work
  • Earnings from stakings and liquidity pools
  • Block rewards and transaction fees from crypto mining

How Much Tax Do You Have To Pay?

The next important question is how much tax do you have to pay in a financial year. The answer to this question depends on two factors:

  1. How long have you held your crypto assets or your holding period?
  2. Which income tax bracket do you fall under?

The crypto holding period is calculated from the next day of your cryptocurrency assets purchase or you make a cryptocurrency transaction, and it continues till the day you send, sell, trade, or exchange your capital asset. This is what decides whether your gains are short-term or long-term capital gains and losses.

Short-Term Capital Gains

Your crypto assets will be considered as taxable ordinary income if you retain them for a year or less, that is, 365 days or fewer. As a result, this income will be considered a short-term capital gain.

At present, the short-term capital gains tax rate ranges from 10% to 37% depending on the income of the household.

Long-Term Capital Gains

When your crypto assets have been held for more than a year or 366 days, it will qualify as a long-term capital gain.

At present, the long-term capital gains tax rate ranges from 0% to 20% depending on the income of the household.

What If You Incur Losses?

If you incur any loss from selling, trading, or exchanging your crypto assets, you can offset your capital gains with your crypto losses. Since the Internal Revenue Service (IRS) considers cryptocurrency as capital assets, you can deduct up to $3,000 in a year from your ordinary income. Any further losses will be carried forward to the next year. However, if you are married and filing a separate tax return, $1,500 will be deducted from your ordinary income.

In this aspect, it is important to note that you have to report your loss on a specific asset class to be eligible for a capital gains deduction.

The Bottom Line: How To Prepare For The Tax Season?

Now that we have discussed everything about how crypto taxes work, we must understand how to prepare ourselves for the tax season. 

Here are some of the important things you need to know when preparing your crypto taxes:

  • Record all your crypto activities: You must keep a detailed record of all the crypto transactions you make, including buying, trading, airdrops, and every taxable event as mentioned in the list above.
  • Calculate your capital gains and losses: Now that you have a record of all your crypto activities, you can manually calculate your gains and losses, or take the help of a number of services and tax calculators to estimate your taxes.
  • Filling your tax documents and forms: There are various tax forms for various types of transactions. For reporting your cryptocurrency capital gains or losses you have to file Form 8949 and attach it to Schedule D form, which is the primary tax form for overall taxes. 

For crypto income taxes you must file Schedule 1 Form 1040 and in case of self-employed crypto earning, you must add Schedule C.

  • Submit forms and pay taxes: Now that you have calculated and filed all your tax documents, all you need to do is submit these forms and pay your taxes on time, unless you want to file for an extension. In that case, you must file for an extension before October 15, 2021.

Calculation and preparation of crypto taxes can be a complicated process. You can take the help of a number of crypto tax-related services, such as Zenledger, to help you easily calculate your crypto taxes. These crypto-tax services will also help you find options for tax-loss harvesting.

FAQs

  1. Should I pay taxes on crypto mining?

Yes, crypto mining is also taxable on the basis of the crypto’s fair market value (FMV) at the time of mining. 

  1. Are crypto donations taxable?

Crypto donations and gifts are non-taxable as per U.S tax laws. However, there are tax implications for donations above $15,000.

  1. What are the tax rates on short-term and long-term capital gains?

At present, the short-term capital gains tax rate ranges from 10% to 37% and the long-term capital gains tax rate ranges from 0% to 20%, depending on the income of the household.

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Source: https://coinpedia.org/guest-post/how-do-crypto-taxes-work/

Blockchain

What does swapping crypto mean?

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Has the number of cryptocurrencies ever piqued your interest? Are we talking about a couple of hundred here? Maybe a zillion people? According to CoinMarketCap, that number is now well over 7,000. With so many options, you may want to test a new cryptocurrency at some time. However, how do you go about doing it?

Good news, then! Making a switch will allow you to test out a different cryptocurrency with ease. Swapping is the process of swapping one coin for another. In other words, how does it all work?

Let’s assume you have some

Ethereum, but you’d like to have Bitcoin. Certain services are available to assist you with this. Swap service providers allow you to trade your Ethereum for Bitcoin, with a value close to the actual exchange rate. To put it simply:

Why would I want to swap?

Now you know what it means to exchange cryptocurrency. On the other hand, why on earth would you want to? Anyone’s motives for wanting to swap their crypto assets for anything else are wide open. So, without further ado, here we go.

Profiting

Making money, that’s right. It’s a hit with everyone. Trading cryptocurrencies have the potential to bring you a sizable return because of how rapidly their prices can shift. You might make a lot of money by trading your crypto at the appropriate time if you are timing the market perfectly and are a little bit lucky.

Increasing your investment options by utilizing diversification

Those sudden price adjustments, on the other hand, are not to everyone’s taste. In general, diversification is seen as a valuable tool for reducing the impact of risk. Having a diverse portfolio of cryptocurrencies may help mitigate the effects of price fluctuations.

A source of ongoing revenue

Wouldn’t it be great if you could receive money for doing nothing? Staking is a method of earning additional crypto without having to do any work on your part. You might try this out by exchanging some of your bitcoin for fiat currency.

But be on the lookout!

Trading cryptocurrency is inherently hazardous, even if you don’t consider security issues. Remember how we said that by timing the market right, you might make a significant profit? If you’re not careful, you might suffer losses of all sizes. Don’t invest or trade money you can’t afford to lose, and do your homework before you get involved.

Additionally, there is generally a charge associated with trading bitcoins. You should expect a somewhat lesser return on your investment.

What is 123swap?

123swap offers an ecosystem of products and services that enables consumers to swap, keep, send, receive, earn, and invest tokens across various chains in a single place of business. To remove difficulties such as complex interface, hidden fees, and a time-consuming registration procedure, the platform has designed its conversion method to simplify the process for the end-user.

Why 123swap?

Users can pick from among more than 500 cross-chain liquidity pools (Ethereum, Binance, Polkadot, and many more). In addition to supporting the most popular protocols, the platform also offers the lowest costs and the highest annual percentage yield (APY) (Annual Percentage Yield).

123swap will differentiate apart from other DeFi platforms thanks to the following features:

In the Smart Economy, 123swap is a prominent crypto swap protocol that enables users to – Swap favoured assets in several chains; hold them; send them; receive them; earn from them; and invest in them. In this approach, crypto assets may be exchanged between peers without the need to put their faith in a third-party custodian or counterparty. The platform offers non-custodial services and aims to provide optimum safety, ease, and comfort for its users. Customers may browse all of the swaps offers gathered from the most important crypto exchanges in one location.

The platform’s goal is to develop a stronghold community. Members of the community will be able to make essential choices on things like team tokens vs. advisory tokens, lock length, and so on through a fair voting mechanism.

Problems solved by 123swap

Exchanges performed by hand are old-fashioned and time-consuming. By utilizing smart contracts, the platform will streamline and automate the swapping process. Smart and autonomous financial management will be available in one location thanks to the cross-chain smart contracts. The platform would promote decentralized financial management via smart contracts. As a result of its technological innovations, 123swap is poised to surpass the competition, improve speed, and establish itself as the world’s leading exchange.

Final Thoughts

Swapping is the process of swapping one coin for another. Certain services are available to assist you with this. You might make a lot of money by trading your crypto at the appropriate time. If you’re not careful, however, you might suffer losses of all sizes. 123swap is poised to surpass the competition, improve speed, and establish itself as the world’s leading exchange.

The platform would promote decentralized financial management via smart contracts. Users can choose from among more than 500 cross-chain liquidity pools (Ethereum, Binance, Polkadot, and many more).

Source: Plato Data Intelligence

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How to Find Crypto Exchanges for Safe Transactions

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As a result of the Covid-19 epidemic, global markets have begun to appreciate the potential of cryptocurrency. Yet, it was previously seen as too volatile and fringe to embrace any sizeable corporate body or company. 

You can buy, sell, and trade cryptocurrencies on top crypto exchanges. You can’t get or sell digital assets unless you have access to a cryptocurrency exchange online. 

Where to find the best crypto exchanges with a fair conversion rate? Look at the list of crypto exchanges at https://coincub.com/. You can see a calculator where you can find out which converter you need to choose depending on how much you need to swap for 1 coin and your location. This way, you can see a chart with many converters that may suit your needs for safe transferring.

Choosing the proper crypto exchange for both novice and experienced advanced crypto traders has been difficult. When you find that one, you can be sure you are safe! 

What to Look for to Find the Best Cryptocurrency Exchanges

Most exchanges primarily allow you to convert Bitcoin, into other digital currencies, such as Ethereum or Litecoin. Your scope may vary when selecting an exchange to convert money for crypto. You may prefer an exchange that supports particular cryptocurrencies, trading pairings, and extra features like margin trading or over-the-counter (OTC) transactions.

How to find an exchange that satisfies your fundamental needs? Consider the following aspects to take into account:

  • Security. By far, one of the essential elements of a transaction is safety. If an exchange is not secure, your cash might be stolen, rendering any other benefits it provides useless. No one likes to lose money; therefore, consider the following factors in this regard;
  • Technology. The web URL of the top crypto exchanges should begin with HTTPS. Two-factor authentication should be used for login security. Customer deposits should be kept offline in what is known as “cold storage.” Auditing tools that monitor exchange activities 24/7 and send SMS with email notifications provide exchange clients additional security guarantees. For optimum protection, allow your IP address or withdrawal wallet addresses;
  • Legal considerations. Choose an exchange from the same nation since this can help you comply with regulatory changes. It should be noted that certain exchanges only support a restricted number of countries;
  • Transparency. The most trusted crypto exchanges reveal addresses, teams, cold storage addresses or assist in the verification of their reserves in other ways, such as audit information;
  • Liquidity. The more liquid a specific exchange is, the larger the trade volume. Liquidity allows transactions to be completed more quickly, simply, and without coping with price fluctuation. Check to determine whether an exchange offers “locked-in” pricing, which assures you the price at the time of your transfer sessions even if it does not settle right away;
  • Costs. Examine all of the fees that an exchange charges. They’re typically less than 1% of each transaction and may drop as your trading volume grows. Examine the withdrawal costs. Some exchanges are known to charge exorbitant withdrawal fees for specific cryptocurrencies. Check the deposit fees as well.

Ultimately, keep in mind that crypto and its infrastructure are still in the early stages of development so that things might change fast. Numerous decentralized exchanges are already in the works, and many experts believe they’ll permanently alter existing exchanges.

Furthermore, laws may be imposed, and new technology or issues may emerge. So keep up with the news and stay informed. The best cryptocurrency exchange is unique to each individual, so conduct your research and be cautious while doing so.

Source: Plato Data Intelligence

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Pound pauses after strong week

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The British pound is slightly lower in the Monday session. GBP/USD is currently trading at 1.3724, down 0.15% on the day. The currency rose 0.98% last week, its best weekly performance since late August.

BoE’s Bailey hints at rate hike

The BoE continues to signal that it is preparing to raise interest rates shortly. The Bank has been sending a stream of hawkish messages to the markets, with Governor Bailey and other policymakers hinting that a rate hike is on its way shortly. On Sunday, Bailey said that inflation would rise higher and last longer due to the surge in energy prices, and that the central bank “will have to act” via monetary policy in order to deal with the risk of high inflation. The BoE has projected that inflation will climb over 4%, which is more than twice its target. In order to curb inflation, the BoE may respond with a series of rate hikes, which could kick off as early as November.

This would be a highly significant move, as the BoE would become the first major central bank to raise rates since the start of the Covid pandemic in early 2020. With the Bank holding its next policy meeting on November 4th, any additional hawkish comments from BoE policymakers will raise expectations that the November meeting will be a live one.

Rate fever is also rising across the pond. Last week, the FOMC minutes indicated that the Fed expects to taper its bond purchases in November or December. The minutes noted that the Fed would reduce the USD 120 billion/ month gradually, until the programme was completely terminated by July 2022. The markets have brought forward the pricing of a rate hike from December 2022 to September 2022, projecting a rate hike shortly after the tapering is complete.

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GBP/USD Technical Analysis

  • 1.3822 is the next resistance line, followed by the round number of 1.3900
  • There is support at 1.3618. Below, there is support at 1.3492

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.

Kenny Fisher

Kenny Fisher

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Source: https://www.marketpulse.com/20211018/pound-pauses-after-strong-week/

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Oil rises on coal, gold under pressure

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Coal lifts oil in Asia

Hong Kong coal futures have leapt 9.0% higher this morning, meaning that the China energy crunch has made its way back to the front of investors minds. That has lifted oil prices in Asia as well, with Brent crude surging 0.80% higher, and WTI leaping by 1.0%.

On Friday, oil prices continued to grind higher, with no sign of any inclination to open the pumps by OPEC+ or announcements by the US government on SPR releases. Brent crude finished 0.90% higher at USD 84.90, and WTI finished 1.25% higher at USD 82.50 a barrel. In Asia, Brent crude has risen to USD 85.65, and WTI has risen to USD 83.40 a barrel as coal futures rocket into space.

With no signs of the China energy crunch alleviating soon, and with the rest of northern Asia and Europe competing for scarce energy supplies, particularly gas, the price environment for oil remains constructive. Even a US or China SPR release is only likely to provide temporary relief. A rapidly reopening aviation sector, with a slew of reopening announcements from ASEAN last week, will be another price pressure point.

Brent crude should now target the October 2019 high at USD 86.80 and onto USD 90.00 barrel, with support at USD 84.25 and USD 82.00 a barrel. WTI now has meaningful resistance until the USD 89.00 regions although I expect some sellers to appear above USD 86.00 a barrel initially. Only a fall through USD 82.00 a barrel changes the bullish outlook.

If Brent crude moves to USD 90.00 a barrel, I expect the pressure on OPEC+ to step up quite a few notches from the US White House. The huge weight of speculative long positioning in oil futures means a sudden USD 5-8 a barrel drop could still occur on a headline shock. However, with the underlying fundamentals for oil so strong, any large dip will reverse just as quickly.

Nervous specs cut long gold positions

Although the US dollar finished roughly neutral on Friday, higher yields across the US curve were enough to spook speculative longs in gold. That saw the predicted rush for the exit door, and gold fell rapidly by 1.60% to close at USD 1767.50 an ounce.  In early Asia, gold has recouped some losses, rising 0.25% to USD 1771.50 an ounce.

The price action on Friday speaks volumes about the gold market now. US dollar weakness earlier last week soured gold buying and drew in fast-money speculative longs. The equally rapid unwinding of most of those gains on Friday reinforces that much of gold’s rally was built on speculative hot air and that those longs have little to no appetite to wear any pain on those long positions. In the bigger picture, the lack of staying power from gold longs suggests that it will struggle to maintain any upward momentum, even if gold reaches USD 1800.00 an ounce. Up via the stairs, down via the sixth-floor window.

Firmer US yields, should they endure this week, will be a headwind for gold rallies, especially if it leads to US dollar strength. Gold has nearby support at USD 1765.00 followed by USD 1745.00 an ounce with failure reopening a test of USD 1720.00. Gold failed for the third day in a row at the 100 and 200-day moving averages (DMAs), today at USD 1795.40 and USD 1796.60 an ounce, formidable resistance.

In the bigger picture, only a rise through USD 1835.00 an ounce would trigger a multi-month inverse head-and-shoulders technical pattern and swing gold’s outlook back to positive. The risks remain firmly to the downside.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.

Jeffrey Halley

Jeffrey Halley

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Source: https://www.marketpulse.com/20211018/oil-rises-coal-gold-pressure/

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