am I liable to taxes when:
>buying defi crypto with eth
>every exchange from eth -> shitcoin -> back to eth?
>changing from crypto to tether/usdc/dai?
>what if I still use coinbase hypothetically and change my crypto to USD but just want to hold gains there?
>what if I only withdraw a portion of my crypto holdings because i invested 99% of my savings into crypto and need some real money to pay my bills?
What country
america
Yeah, you're liable for everything, basically. Whether or not the IRS ever finds out is another story. If you use Coinbase, they will find out. And if you are trading within one year, you are gonna owe short term capital gains tax at your income tax rate.
Wouldn't you only owe on the profits that you actually cash out?
Also looking for these answers. So you only have to pay taxes after you cashout/convert to USD?
This is my question too. if in total I put in like $3000 into various cryptos but withdrew $1000 so I'm not making a profit then wouldn't I be free from taxes?
I assumed it was if you withdrew at a profit compared to the total amount you deposited for that calendar year
no, the IRS actually expects you to pay taxes for holding crypto, it's retarded.
but also if you half ass it and try to figure out profits and losses and get it wrong well, you're not an accountant, if they decide to audit you (highly unlikely unless you're dealing with large sums of money) I think it would be difficult to hold you criminally liable. Worst case they jew you out of some of your profits.
So pretend this is the circumstance.
I put in $10k this year, I profit $1k. They tax me on the $1k profit? Next year I just hold the $11k and profit another $1k. They would just tax me on the new $1k profit?
Why would they tax you on holdings? They don't tax me for holding in a savings account that has interest, that could be considered an investment because you're profiting. Am I misunderstanding this? Either way, I'm getting a tax pro next year
No whenever you disposition (give up an asset for another) you're liable for capital gains tax on the gains and capital loss on the losses.
Net gains per year? or net gains from the initial investment? If you gain $1k, and it stalls at $1k profit for 10 years (impossible I know, but just hypothetical) Would they just keep taxing you on the same $1k over and over again? Or just once?
No it works like this-
You buy 50 eth at $200 each on January 1st, 2020. On may 1st, 2020 you sell 25 eth for $220 each. You owe 40% on the $500 (20*25). So your tax bill would be $200.
No it works like this-
You buy 50 eth at $200 each on January 1st, 2020. On may 1st, 2020 you sell 25 eth for $220 each. You owe 40% on the $500 (20*25). So your tax bill would be $200.
It's only when you disposition. If you buy BTC at $500 and hold and it goes to $1500 you don't pay anything. If you sell at $1500 you have to pay taxes on $1k. Only realized gains are taxable.
Let's say you buy two Bitcoin for $50/ea and the price doubles. Then you trade one Bitcoin for $100 worth of link. You have a taxable event of $50 profit.
what if you never cash out lol, theres no way they are following your trades
what if i sold link for xrp and missed out on like a gorillion dollars?
jesus christ this is such a headache. I wish I could just let them tell me what they think I owe
gains at the time you sell (trading is selling too). they use your cost basis, which is the amount you paid for that particular piece of crypto (google fifo). selling price - cost basis - fees = taxable gains
ive traded so much over the years i dont even know how they will expect me to know how much i earned.
If you never cash out the you never took profit and you owe nothing.
Also it's up to you to track your trades. Maybe you never get audited, but what happens when one day link hits $1000 and you cash out? If you don't have proof you've held over a year, the IRS will expect 40% from your total withdrawal because you can't prove you held for a year and what your initial investment was.
Yep. Its honestly what makes me hold and not day trade.
crypto to crypto = taxable event
>Yep. Its honestly what makes me hold and not day trade.
i havent reported it ever but never got a letter or anything... shit will probably be different this year because I sold some into USD and wired to my bank account
Holy fuck you guys are retarded about taxes. You pay tax ON NET GAINS. If you SWAP to a stable coin and MAKE NO GAINS YOU HAVE NOTHING TO PAY TAX ON. IN FACT YOU CAN CLAIM THE FEES AS LOSSES WHICH OFFSET OTHER GAINS. IT IS EASIEST TO TRACK SHORT TERM VS LONG TERM NET GAINS ON A TRADE BY TRADE BASIS. THIS ACTUALLY SAVES YOU MONEY IF SOME OF YOUR GAINS ARE LONG TERM. FUCK I HATE ALL YOU STUPID FUCKING KIDS. YOU DONT KNOW SHIT ABOUT FUCK COME AT BRO RIGHT FUCKING NOW
That doesn't work. If you can't prove a cash basis, they'll assume a $0 basis. Meaning if you get audited, they'd assume your crypto was all free and had no transaction fees so every sale is 100% income. It's in your best interest to keep these records.
Oh VS like the actual amount I made on it ? they'll tax me 40% on all of it if they assume its income?
Trade = cap gains.
API3 solves the "trading" problem.
Correct, but you still need to track each swap into stable coins so you know your buy in price and sell price.
Yes. basically
>be irs
>hey user you sold $150,000 worth of crypto, we want $60k in taxes please
>be you
>i have no records
>you are fucked
>be you
>here are my records, I paid $120,000 for that crypto and held it over a year, here is proof
>irs: ok your tax bill is $4,500 instead
If you can't prove where the money came from then it is all capital gains. Your original investment will be included in the 40%.
and that's why exchanges have all of that stuff on record