Saturday, July 2, 2022
CryptocurrencyTaxation On Cryptocurrencies: The Fundamental Facts

Taxation On Cryptocurrencies: The Fundamental Facts

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One of the foremost economic changes of the present era is the alternative available for the conventional currencies. Usually called ‘crypto’ and referred to as ‘digital currency’ otherwise, Ether and Bitcoin are the most popular instances of it, though there are many other options.

If you have recently made the decision to start crypto trading, and you are about to open your account at 1k daily profit app, you might consider the taxation details related to cryptocurrency. So, read on to know more!

Photo by André François McKenzie on Unsplash

Where does cryptocurrency get its value from?

In economics, it is said that all forms of currency derive value from its usefulness as an exchange form (i.e., it can be spent) and as a store of value (saving for future usage). Crypto is popular because it has both these qualities.

Of course, the value of crypto is not too stable, unlike most of the conventional currencies. Consider those dollars kept in the bank that only change their value in the long-term due to the decrease brought by inflation. By comparison, take a look at the everyday value of the major cryptocurrencies. It is highly volatile and keeps fluctuating wildly in comparison to the fiat currencies.

Thus, while crypto is said to be worthy because it can be exchanged and stored, it is still not possible to say the exact worth of Ether or Bitcoin tomorrow. However, for most investors and traders, the prospect that this digital currency can have a price surge keeps the niche active – and leads to the creation of several crypto exchanges.

Why and how is cryptocurrency taxable?

The taxation policies are different from a country to another. The shortest answer to the question is that it depends on your location, the kind of digital assets you are holding, your losses and profits, and the duration for which you have been holding the asset.

Let’s explain this further with an example. The law in the United States of America considers virtual currencies, such as Bitcoin and the likes as capital assets – similar to the bonds or stocks that are held in a portfolio. Due to the fact that Bitcoin and altcoins are all subject to capital losses and gains, you owe taxes on them when you start selling them for a price that is higher than your initial cost for them. However, the situation is a lot different for the countries like Hong Kong, Singapore, and the likes. In any case, the regulations tend to change and evolve from time to time.

Definitely, even when you owe any tax on the crypto, the amount that you owe completely depends on the size of the capital gains and the tax rate paid by you based on the income bracket and other factors. The present tax rate on the long-term capital gains, depending on the income bracket, is around zero, fifteen, or twenty percent.

Endnote

Hopefully, you now have a basic idea about taxes on cryptocurrencies. For more information, you can contact your crypto broker right away.

 

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