In the past few years, more Americans have become exposed to the emerging asset class of cryptocurrencies, which most famously includes Bitcoin. As adoption of these currencies continues to grow, individuals engaged in these new markets may trigger taxable events, which must be reported to the IRS.
The crypto landscape has not been adequately defined by the US Government for taxpayers, and as a result, many people are confused as to how to report trades in this new market.
The basics are as follows:
- Purchasing cryprocurrency is not a taxable event.
- Selling cryptocurencies for US Dollars is a taxable event.
- Trading one cryptocurrency for another is a taxable event [ie: Trading Bitcoin for Ethereum].
- Using cryptocurrencies to purchase goods or services is also a taxable event
In order to properly and accurately report capital gains, please keep track of your trades on exchanges. If you have purchased and sold cryptocurrencies and have tax questions, feel free to contact us. Furthermore, if you have purchased cryptocurrencies but have not made any sales, you have nothing to report. If you have any more questions, please give us a call and ask for Sebastian.