CUSO-News---Payments-Report

close

Categories

More Tags

Subscribe to Email Updates

Popular Stories

The Quick On Visa’s 8-Digit Bin Migration
cred.ai — The Newest Card Provider Targeting Millennials & Gen Z
In 2021, Low Tech Crime Is Still Very Successful
Do Credit Unions Have A High Barrier To Entry Problem?
BNPL Continues To Gain Traction
Written by Cyndie Martini
on April 19, 2022

Crypto currencies have been around for a while now, and their tax implications are well-known at this point. However, that doesn't mean people are familiar with them. As more people get into trading, investing, and lending cryptocurrencies, new tax questions and scenarios can surface. Let's run through a few questions on the tax implications of selling crypto currencies.

If you don't take money out of your account, are you still taxed? Yes, you are taxed when a buy/sell transaction completes. This means when a sell of the crypto accompanies a buy. That transaction creates a taxable event even if it remains in your account.

If you buy bitcoin and hold it but don't sell, and it goes up, are you taxed? No, because the transaction has not been completed. There is no sell to offset the buy. This is called an unrealized gain.

How much will you owe in taxes? You are only taxed on profits when a crypto currency is sold. For example, you buy $50k worth of a crypto currency and later sell it for $60k. Your profit is $10k, and that is what you'll be taxed on (not $60k).

Next, the amount of taxes will depend if the sale was a short or long-term capital gain. A short-term gain is for holdings of one year or less. Short-term capital gains are taxed at your ordinary income rate. A long-term capital gain (LTGC) is for holdings over one year and is taxed at a lower rate than your ordinary income. This creates an incentivization to go for long-term capital gains because they are always favorable to your ordinary income rate.

To see some of the advantages of long-term capital gains rates, we can look at a few loose estimates. If your regular income rate is:

30-35%, then your LTCG rate is 20%

28%, then your LTCG rate is 15%

10%, then your LTCG rate is 0%

For transactional crypto scenarios, tax implications are similar to that of stocks. Although, it's always best to work with your tax professional when figuring out the tax impact of selling crypto currencies.

 

 

Let Us Know What You Thought about this Post.

Put your Comment Below.

You may also like:

Cryptocurrency

Crypto-as-a-Service (CaaS)

Providing cryptocurrency-related products and services to your customers is a complex task. For credit unions that have ...

Cryptocurrency

Another Crypto Exchange Hacked (for $196M)

Yet another crypto exchange has been hacked. With as much attention as crypto has gotten in recent years, you'd think th...

Cryptocurrency

More Banks Providing Crypto Custody Services For Institutional Clients

Trying to custody cryptocurrency using the current exchange platforms is fraught with issues. There are concerns about h...