Taxes on cryptocurrency gains

Mining crypto – when mining crypto as a business, any income made is taxable as it falls under trading profit. This also applies to any gains made when disposing of your cryptocurrency too. On the flip side, mining as a hobby is slightly different. If you receive an income or a reward for mining, these will both be subject to crypto tax. Later down the line, when disposing of assets, you’ll be subject to capital gains tax too. How much taxes do you have to pay on cryptocurrency To calculate the amount gained or lost, taxpayers need to know how much crypto they started with. That amount is called their cost basis. For example, when buying cryptocurrency, the cost basis generally depends on how much the buyer pays. However, if crypto is received from mining or staking, the cost basis depends on the fair market value at the time of reception.

Long-term crypto tax rateIf you hold cryptocurrency for more than a year, your proceeds will be taxed at the advantageous long term capital gains rate. Your rate also depends on your overall income, but long term capital gains are generally lower than the short term capital gains rates. Do you pay taxes on crypto in the USA? Example: You are subject to income tax. You are a higher rate taxpayer. You purchase bitcoin for £10,000 and sell it at a later date for £30,000 (amounting to £20,000 in gains). You have made gains of £7,430 above the annual tax-free allowance. You will need to pay 40% income tax on this profit. Therefore, you must pay £2,972 in income tax on your profits from bitcoin.

It’s likely that investing is the main reason that people get into cryptocurrency. When investing in crypto, unlike other forms of investment, you don’t actually pay any tax on the currency itself while you hold it. You simply hold it, and watch it as the market changes. More on tax cryptocurrency If you sell cryptocurrency for a profit, you're taxed on the difference between your purchase price and the proceeds of the sale. Note that this doesn't only mean selling crypto for cash; it also includes exchanging one crypto directly for another and using crypto to pay for goods or services.

While this might seem like a lot to track, don’t take any shortcuts with your cryptocurrency taxes. You should even consider hiring a tax professional. Need to Pay Taxes on Crypto? TurboTax Can Help 04.How can CryptoTaxCalculator help with crypto taxes?You just need to import your transaction history and we will help you categorize your transactions and calculate realized profit and income. You can then generate the appropriate reports to send to your accountant and keep detailed records handy for audit purposes.