A Useful Guide To Cryptocurrencies And Taxes

Jump to page contents

A Useful Guide To Cryptocurrencies And Taxes

With so much attention on the rising price of Bitcoin and the new, overnight millionaires in the industry, it could be easy to overlook the important topic of taxes. Although blockchain’s decentralisation and anonymity might make you feel as though you can evade paying taxes, the law in various countries is extremely clear on the subject.

Depending on your country of residence, different tax laws apply, and if you think you can keep your transactions a secret you’re forgetting one important feature of blockchain; its transparency. All transactions are recorded on viewable ledgers, with relevant wallet addresses visible. All the taxman needs to do is associate the address with a name.

Cryptocurrency Tax Rules in the United States

The IRS classifies cryptocurrencies as property, so you must calculate your taxes based on this principle. In order to facilitate your tax calculations, keep a record of your transactions, including income from mining and trading. Be sure to also keep a note of your investments in equipment, such as mining rigs, and losses, as these too will affect your total taxes owed.

Simultaneously, the IRS is putting pressure on top US-based exchanges, including Coinbase and Gemini to provide details of their US-based users. Whilst they are requesting that the exchanges fill in what is known as the 1099-K form, there is no room to provide accurate information on capital gains and losses. You can find more information about calculating and paying taxes on crypto in the US via this Coinbase page.

Cryptocurrency Tax Rules in the Rest of the World

Whilst the majority of Europe is made up of the European Union block, individual countries have, so far, taken different approaches to cryptocurrency taxation. In the UK, for example, cryptocurrencies such as Bitcoin and Ethereum are treated as foreign currency and are subject to capital gains tax in case of profits originating from trades.

Their German neighbours treat crypto a little differently. Whilst trading cryptocurrencies do not incur capital gains tax, if the investment is held for less than one year, then income taxes apply. In this case, persons could be taxed up to 45%. A similar approach is taken by the Swiss government, however, residents must also pay profit and wealth taxes for their crypto holdings.

Malta, which in 2018 passed several laws focusing on cryptocurrencies and DLT, takes a more pragmatic approach. In most cases, crypto is treated like fiat currency for tax purposes. In these cases, no income tax or duty is levied, however, capital gains tax do apply for transactions which result in a profit. Whilst these could be as high as 35%, through various structuring options it is possible to reduce this to 5% or even less.

Japan has taken a similar approach to Malta. The country which since 2017 accepts crypto as legal tender taxes crypto as miscellaneous income, with any gains taxed at between 15% to 55%.

Ready to join our tribe?

We respect your email privacy

Subscribe now to recieve exclusive updates and offers!

Recently Similar Guides

Latest Guides

Analysis,Litecoin,Technology

Is Litecoin a good investment right now?

Litecoin is popularly known as the second cryptocurrency to be created, as it came to life in 2011 by a former Google employee, Charlie Lee. It is an open-source software that aids peer-to-peer cryptocurrency transactions. It is quite similar to Bitcoin and most times referred to as an altcoin or spinoff of Bitcoin. We cover […]

21 July, 2021
Altcoins,Analysis

5 Top Altcoins That Will Explode in 2021

Cryptocurrency is a concept known to virtually every human on the face of the earth. From the launch of the first cryptocurrency, Bitcoin, it has gradually become an acceptable financial concept that has the potential to take over from the traditional fiat currency. Apart from Bitcoin, which is widely known as the most popular and […]

14 July, 2021
Analysis,Cryptocurrency

What is the Fear and Greed Index?

No crypto investor wants to buy an overvalued coin only to discover that their long position has been Swiss-cheesed even before the move was made. More often than not, the glittering of a ‘coin’ is a question of unstable human emotions instead of adequate research and tenable data. To properly evaluate the worth of a […]

5 July, 2021
Binance,Coinbase,Cryptocurrency,DogeCoin,Ethereum,Stablecoin

What is a gold-backed cryptocurrency?

Gold-backed cryptocurrency can be defined as a stablecoin that backs each token with physical gold. Because of the volatility of the cryptocurrency market, many people are uncomfortable with the market and so prefer to invest their money in different stocks and indices. But with a gold-backed cryptocurrency, the token is pegged to a current gold […]

27 June, 2021
Bitcoin,Crypto Wallets

How long does Bitcoin take to send?

Bitcoin is king when it comes to cryptocurrencies. As the pioneer in the industry, it has maintained its position as number one in terms of market cap and daily traded volume. But have you ever wondered, how long does Bitcoin take to send? Or how long does a Bitcoin transaction take? Well, in this article […]

22 June, 2021
Crypto Mining,Mining

CPU vs GPU Mining at Home: Which is Better?

As cryptocurrency becomes mainstream, more and more people are getting involved in the crypto-world. This has also raised curiosity on how to mine cryptocurrencies and not just exchange and purchase them. As exciting as this sounds, crypto-mining is not easy to achieve, as it requires deep technical knowledge. If mining cryptos is something you are […]

15 June, 2021
Crypto Wallets,DogeCoin,Ethereum,Litecoin,Ripple

Best Ways for Coin Storage to Protect Your Cryptocurrency

As the price of Bitcoin and other cryptocurrencies continues to soar, news of people who have lost access to their crypto stash is always hitting the headlines. Recently, Stefan Thomas, a German-born crypto enthusiast, made news when he had only two attempts to his password for him to access his 7,002 Bitcoins worth millions of […]

9 June, 2021
Crypto Mining,Mining,Monero

How To Mine Monero (XMR) In 2021

In this how to mine Monero guide, we will provide you with the important information you need to know before you mine this cryptocurrency. We will also offer guidance on building your Monero mining rig and where you can sell your coins for a profit. What is Monero? Monero is an open-source digital currency that […]

6 June, 2021