This question has been always on my mind. HOW IS CRYPTO GONNA BE TAXED? Trading, spending or selling your crypto are often taxable events. To calculate your taxes, you will need to consider your capital gains and losses. Thing is if you HODL or trade, at some point, you'll probably have to pay crypto taxes. No matter what you do tax will follow but the amount of tax will depend on your country (since countries got different tax percentage).
Here's some consolidated questions from Binance Academy that tackles this topic to help us understand more about crypto and taxes.
Do I have to pay taxes when I buy or sell crypto?
Your taxes will depend on your location, how long you've held your crypto, the type of activity you're doing, and other factors. In general, you'll probably need to pay taxes or offset losses for selling but not when you buy.
What’s a taxable event?
This is a transaction or activity you're required to pay taxes on. These events aren’t universal. A taxable event in one country might not be one in another. Typically, transactions involving the sale of commodities, investments, and other capital assets are all taxable. Purchasing digital currencies like Bitcoin or BNB with fiat currency is unlikely to be a taxable event. However, selling or trading your crypto is likely to be taxed.
What are taxable and non-taxable events?
Generally speaking, taxable events include:
1. Selling cryptocurrency for fiat currency (i.e., USD, CAD, EUR, JPY, etc.).
2. Trading cryptocurrency for another cryptocurrency (e.g., BTC for ETH).
3. Spending cryptocurrencies. In jurisdictions including the US, UK, Canada, and Australia, directly spending your crypto on goods or services can incur taxes if you made profits.
4. Receiving cryptocurrency as a result of a fork, airdrop, or mining.
On the other hand, the following are generally not considered taxable events:
1. Buying cryptocurrency with fiat currency (except in cases where the purchase price is lower than the fair market value of the purchased coin).
2. Donating cryptocurrency to a tax-exempt organization.
3. Gifting cryptocurrency under a specific limit.
4. Transferring cryptocurrency from one wallet you own to another wallet you own.
Now, for the last question that's also been on my mind ever since the "taxing" fiasco began.
How is cryptocurrency taxed? Here's an answer from an article on Binance Academy:
Tax authorities commonly count crypto as a capital asset and not a currency. If your country hasn't passed specific crypto taxation laws, expect your crypto profits to be taxed according to their official designation (if any). Some jurisdictions take a much simpler approach. Germany, for example, has no tax on crypto held for over a year. Malaysia, Portugal, and Singapore also have very liberal crypto tax rules.
It is always a must to equip ourselves about taxes, why? because it is always our duty to pay the right amount of tax to our Government. Yes, it is sad that we need to pay and it will really reduce our income but it is our responsibility.
