For anyone who bought Bitcoin and other cryptocurrencies when their prices were high, there’s a silver lining around the gray state of crypto markets now. Any losses taken could place traders in a lower tax bracket. What’s more, claiming those losses is made easy with Cointracking.
Crypto Taxes 101: How Does it Work?
For the purposes of taxation, the US and most other governments consider cryptocurrencies to be assets. This means that whenever cryptocurrency is traded, the transaction falls into one of two categories: a capital gain or a capital loss.
- Capital gain. A capital gain occurs when cryptocurrency is sold for more than the amount that you paid to purchase it.
- Capital loss. If cryptocurrency is sold for less than the amount that it was paid for it, this is considered to be a capital loss.
Traders have to sell or buy an asset to trigger a taxable gain or loss. Once the move has been decided, tax authorities consider the loss to be “realized.” If the loss is great enough, the trader may be able to use it to enter a lower tax bracket.
Deducting Crypto Losses
One of the biggest benefits of claiming a loss is that it can offset income gained from other sources. In the US, the IRS lets the public deduct up to $3,000 worth of net capital losses each year from the amount of money they earn through their job. If the amount lost was greater than $3,000, another deduction of up to $3,000 can be applied to an annual tax return.
Individuals who earn over $50,000 at their job could find that a $3,000 cryptocurrency loss could place them in a lower tax bracket, and result in thousands of dollars of tax savings. Additionally, any income through stocks or the sale of property, is not subject to a deduction limit.
Making Life Easier
Calculating losses when it comes to cryptocurrency can be a headache at the best of times, due to the volatile nature of these assets ‘value’. Fortunately, there is software available that can crunch all the tax data required to make this process much easier.
The CoinTracking.info tool can import all transactions from any cryptocurrency wallet or exchanges. The intuitive interface walks the user through how to do the imports. At the end of the import process, users can download IRS form 8949, which will do all that is needed by the user to report any losses. Other download options include CSV, TaxACT and TurboTax
The great news here is that anyone who has lost money in the crypto market is now eligible to offset some, (or perhaps even all) of those losses at the end of the tax year. Reporting capital losses might help users move to a lower tax bracket. If deductions qualify our users for a lower bracket, filing them could save thousands of dollars when it comes to the form submission phase.
Visit CoinTracking.info for more information.
Cointracking is the source of this content. This Press Release is for informational purposes only. Virtual currency is not legal tender, is not backed by the government, and accounts and value balances are not subject to consumer protections. Cryptocurrencies and tokens are extremely volatile. There is no guarantee of a stable value, or of any value at all.
Image Courtesy: Cointracking