How to Deal With Cryptocurrency Taxation, Summary of the Year That Just Finished

Dec 26, 2018 at 13:34 // News
Author
Coin Idol
Many countries are devising different rules, trying to manage the fintech field.

Taxes have always been a hard matter for everyone to deal with. Many countries are devising different rules, trying to manage the fintech field. Traders from all parts of the world are facing the necessity to pay taxes from their crypto activity.

Taxation Around the World   

With the growing number of crypto users, authorities around the world have found it necessary to tax the profits from this new area. For instance, the United Kingdom introduced a crypto tax advice paper, stating that each investor must pay capital gains tax for selling digital currency such as Bitcoin.   

Switzerland sees no aim in regulation, as it wants to create the most favorable conditions for fintech and blockchain companies. However, Russia has the opposite point of view and is developing a law, which takes 13% tax on profits from trading virtual coins.   

Some representatives of crypto community greet such regulations, stating they might be beneficial to the market. Vladislav Kiselev, a successful serial entrepreneur, crypto investor and Founder of The JOY, an ecosystem for the consumers and providers of wellness and beauty treatments, told Coinidol:   

   

“My opinion is that tax regulations for cryptocurrencies will be of great benefit to the market. The fact that cryptocurrency incomes will be regulated means additional recognition on the government side, and therefore increased trust from banking and other classic economy sectors. The value of regulated and legislated crypto space is much higher than potential losses of investors.
Moreover, in some countries new regulations will actually mean lighter tax burden due to the fact that crypto remains in gray zone. Regulations will hopefully put to end the overly complicated tax reports in the U.S. and several other countries as well. Thus, I percept upcoming regulations as a definitely positive sign for crypto.”   

Alex Reinhardt, Venture investor, business development expert, serial entrepreneur, Co-Founder and CEO of  ELVN Crypto Messenger and Wallet, stated to Coinidol:

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"I am sure that in 2019 we will witness an emerging across-the-board regulation of the cryptocurrency industry and everything related to it. Will this affect the market? Yes, definitely. We should expect the coming of major institutional investors with big money who need to have clear-cut rules of the game. This will also impact the price, for it will continue to grow driven by a growing demand. Regulation will make the market more transparent and drive away various semi-legal players and scam projects. The anarchy period is over. We need to admit this and move forward."

While Korea is considering how to tax cryptos and ICOs, Japan has officially announced its intention to decrease cryptocurrency taxation. As for South Africa, its government shows a positive attitude towards crypto trends. Nevertheless, it has become required to declare income from digital currency trading starting this year.   

American Citizens Pay Fewer Taxes   

While the rest of the world is still thinking about what to do with crypto taxation, the US has gone further and offered its citizens a way to pay fewer taxes. Back in 2014, the Internal Revenue Service (IRS) released a notice, according to which, cryptos are regarded as an investment property. Thus, unsuccessful crypto trading is considered a capital loss. In the USA, such losses can put a trader in a lower tax bracket. Moreover, taxpayers can deduct $3,000 in capital losses for any given year from money earned from a day job.   

Let’s imagine, for example, that you purchased $5,000 worth of Bitcoin this year. Then you made $10,000 from them via trading, however, you lost $8,000 due to a big price dip on the crypto market. After all, you cashed out $2,000 that remained. You would be able to pay off a loss of $3,000 by money that would be deducted from your taxable income. That means if you made $70,000 per year in regular income, taxes would be expanded only on $67,000.