Cryptocurrencies have been a hot topic over the years – and with people still looking to make their fortunes online, it’s not looking to slow down now.
There are so many types of cryptocurrencies out there (Ethereum, Litecoin, Cardano, Polkadot, Bitcoin, Stellar and Dogecoin, for example) but they all hold in common the same thing – their existence as digital currency (underlined by blockchain technology) – makes them nearly impossible to double-spend or even counterfeit.
Let’s take a closer look
While cryptocurrencies are decentralized (meaning these currencies are entirely separate from the government or other centralized authorities) and yet they are still subject to capital gains tax in the US (in other countries such as Portugal, this isn’t the case). Essentially, this means that as a US taxpayer you have to pay tax on the profits that you’ve made on your crypto.
For example, if you sell your crypto after over a year, then this will be classed as long-term capital gains. If you’re selling in less than a year, then this will be classed as short-term, and you will actually be taxed at a higher rate. You can also be taxed for spending and trading cryptos.
It’s possible to circumnavigate some of these taxes by ensuring your crypto is owned by a trust called a Private Contract Common Law Complex Trust. This system means that you can class the crypto as security (or ‘stock’), and therefore you don’t have to pay capital gains tax on it. To ensure you’re doing it correctly, you can hire the services of a financial professional. Are you agree with it?