U.S. Crypto Tax Guide 2022
By Space Coast Daily // April 10, 2022
At the early stage of cryptocurrency launch, they were stateless entities. That means, there was no governing body or legal framework that controlled cryptocurrencies. However, it is not the same anymore. The world of cryptocurrencies has seen new highs. The number of people investing in cryptocurrencies increased. More and more people started accepting cryptocurrency. You can also start crypto trading on bitcoinxapp.com.
In countries like the US, many tech companies started accepting it. They have included it in their financial world. It has become part of their transactions. Many service providers and merchants started accepting cryptocurrency as a mode of payment. With so many changes in the crypto world since its launch, it has even become taxable income. If you look at US tax rules for cryptocurrencies, it is one of the top countries that started regulating the transactions and their usage in the country.
The IRS of the US has established different frameworks and taken several steps to ensure all crypto transactions are safe. But cryptocurrency is still not considered legal tender in the US. If you are not aware of the tax rules in the US, then this blog can work as a US crypto tax guide 2022 for you.
When should you pay the tax in the US?
As an investor in cryptocurrency, you need to understand when you are taxable. Many people think that the moment you start investing in crypto, you will be taxed. But that is not true. You need to know the basics to understand when you are taxed. When you buy cryptocurrency with US dollars, and you secure them in your wallet will not subject you to taxes. So, here is when you will be taxed in the US:
■ When you are selling your cryptocurrency for any fiat currency like Japanese Yen, US Dollars, and others.
■ If you send cryptocurrency to someone in the form of a gift, then it is taxable. It should be more than $15,000.
■ If you purchase any goods or services using cryptocurrency also subject to taxes.
■ If you are trading your crypto for another cryptocurrency will make the amount taxable.
So, only in these four situations, you are subjected to pay tax. Else you will not be taxed for just buying cryptocurrency. You will be taxed only on the amount that you make from the investment and not the actual amount of the asset.
How much tax do you need to pay?
Another important thing that you need to know regarding the US tax rules is how much tax amount you need to pay. This calculation is done based on how long you are holding the assets before you start exchanging or disposing of them. You should also check the amount that falls into which income tax bracket.
There are two different ways how the tax is calculated – Short-term capital gains and long-term capital gains. Any cryptocurrency that you hold for less than a year comes under short-term capital gains and those above one year come under long-term capital gains. Whether you are filing as a single, married and filing separately, married and filing joints, or filed by the head of the family, you will be taxed in the same manner.
The percentage of tax depends on the slab or bracket in which you fall. The tax amount is high for short-term capital gains compared to long-term capital gains.
So, if you wish to invest in cryptocurrencies, then it is always safe to hold them for the long term. That way you will be able to save a lot of the amount that you pay for tax at the end of the financial year.
The process of filing and preparing documents for crypto tax is very tedious, especially if you are doing it for the first time. It is very important to collate all the documents required for tax filing. You need to spend time filing taxes if you are having more than one or two trades. It is important to enter all the details perfect for the completion of the filing process. Calculate the capital gains and deduct the loss from them for better filing.
So, this was some useful information about crypto tax in the US.