Last year, thecryptographers community targeted taxpayers who settled assets to cover inflated tax bills due to the substantial profits obtained during the Bitcoin bull fighting 2017 as one of the main reasons why the bear market had started.
In 2018, however, the opposite happened, and most of the investors in cryptocurrencies suffered massive losses, since the price of Bitcoin and other cryptocurrencies decreased up to 80-90% in most cases. With the tax season running again, investors should liquidate assets to block realized losses that can be claimed on a person’s taxes, offsetting other aspects of the person’s tax bill, or possibly leading to a return.
However, the new data reveals that only 34% of the losses observed by investors in US cryptocurrencies in 2018 have been realized, suggesting that most Americans do not understand the Tax Laws related to cryptography and do not give account that they can claim the losses of their taxes.
Nearly two-thirds of US cryptographic losses may not be realized
According to credit monitoring services company Credit Karma, citizens of the United States have suffered losses related to their investments in cryptocurrencies in the amountof $ 5 billion. However, only about one third of those $ 5 billion in losses will be made, that is, they will be lost, which is approximately $ 1.7 billion.
When an individual US taxpayer invests in a cryptocurrency, a cost basis is established for tax purposes.The sale of an asset also triggers a taxable event. How much that asset has appreciated, or in the case of the bear market of 2018 that is still inprogress, how much that asset has depreciated, at the time of its sale,determines what the individual is responsible for taxes. If an asset is never sold, the gains or losses are only gains and losses on paper, which means that they can not be claimed on an individual’s taxes, but they can still be reflected in the investor’s portfolio.
The data suggests that Americans do not understand that assets must be sold to trigger the taxable event and block unrealized losses that can be claimed on their taxes, or the HODL mentality has done so they simply will not sell their assets for any reason, not even to block unrealized losses for tax reasons.
The general manager of Credit Karma, Jagjit Chawla, says he is the first.
The Manager reported: “Although those who sold their bitcoins at a loss can usually claim a tax deduction, we found that before conducting our survey, 61% of respondents who lost money on bitcoin did not realize they could get a tax deduction for bitcoin losses”.
The survey revealed that respondents were generally confused, with more than half believing that their losses were too small to make an impact, while others did not even know they had to file their cryptocurrency losses on their taxes. Failing to do socan lead to severe penalties. Some claimed that they did not even know how to present their cryptography losses.
US cryptographic taxlaw, It is complicated and varies according to the duration of the HODL
To complicate things further, in the United States, cryptocurrencies are treated as property and are subject to capital gains tax in the same way as real estate. Tax rates on capital gains vary according to income levels, and are classified as “short-term” and “long-term”, depending on how long the owner has kept the asset. Each classification also has different rates.
Blocking cryptocurrency losses could allow war-ravaged investors to claim up to $ 3,000 in losses on their tax bills. Losses exceeding $ 3,000 can be transferred to the next fiscal year. Investors can also use the accumulated losses to compensate for possible fiscal gains in next year’s tax bill, if the cryptocurrency market is finally revived and this year a new bullish run begins.
When investing in cryptocurrencies, be sure to also talk to a certified public accountant who is well versed in the Capital Gains Tax Law, and who at least has a familiarity with cryptocurrencies. Given the novelty of technology and asset class, this can be like finding a needle in a haystack, but considering how important taxes are to anyone, knowing that your cryptocurrency taxes are properly managed is worth the effort additional.
Investors must at all times initiate the possibility of investigating, from the reality of the taxlaws of each country, it is very important to seek information first hand, so as not to commit errors that may generate penalties and penalties that lead to a serious sanction against the treasury of each nation. It is waiting for new announcements.
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