DISCLAIMER: I AM NOT A TAX PROFESSIONAL, PLEASE DO YOUR OWN RESEARCH ON THIS IMPORTANT TOPIC!
Many people have been wondering how their crypto transactions/dealings are going to fit into their taxes this upcoming tax season in the U.S. This is admittedly a very confusing topic that is likely going to be a huge hassle. I dove in and did some research on how our crypto/Bitcoin dealings are going to be taxed so I made this video to share my findings with you! Topics include: Like-kind exchanges, Capital gains, FIFO, LIFO, determining USD value, spreadsheet example of trading altcoins, and much more! If you find this helpful, I'd love to hear from you in the comments below and also get a LIKE/SUBSCRIBE!
Previous Bitcoin taxes explainer video: https://youtu.be/-SvZWDl3wJ4
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Let's say I bought 1 bitcoin at 10k$. Now I used that to buy some altcoin. If I make a 10x profit on the altcoin & sold it in less than a year, then I would be paying short term capital gains on that. But the 10x profit was in bitcoin. Let's say I got 10 bitcoins as profit. So do I have to pay tax on the bitcoin gains when I sell btc for USD? This essentially means that I could be paying tax twice on the same trade profit. Let's assume I sold the 10 btc at 10k as well.
If you have gone from fiat to crypto, the a fraction of that to by another crypto and the a fraction of that to buy another crypto, you are screwed. You have to be a super computer / A.I to work such a thing out.
The whole point of this is to drive non institutional investors out of the crypto Market. The big news here is that we all must pay our gains to the govt even though they are UNREALIZED gains. Essentially pain the govt on credit while are crypto still Remains at risk.
The government fears this Market as it takes away their source of revenues. Once again they're using the most feared and Powerful arm of the government the IRS to manipulate the people.
So I only put 500 dollars in cryptos. I haven't gained any money at all in fact i lost about 250 dollars. I'm 19 years old. Should I even bother filing my cryptos for taxes? Everyone's been telling me it's not enough money for the ira to come after me
Hi Roshan, if you're still holding the original $500 worth of crypto, you don't need to tell the IRS about it. You only need to tell them when you transfer it back into USD, whereby profiting or losing money that needs to be recorded. Don't listen to your friends when they say "it's too small for 'them' to come after you". There's no reason to commit fraud or tax aviation over something so small. I remember a movie quote once too, "We make too much money to go to jail" referring to making money in the stock market in strange ways. Submitting your tax forms with small profits and losses are what will keep "them" from coming after you for tax aviation. Remember, if you buy and hold a house an the value goes up or down, you don't report that to taxes until you sell it. Same thing with all investments, big or small, crypto or stock, house or bonds, etc. Hope that helps! Chris Bell - BELL Token
Hi Gisael, correct. BTC address 1 sent to BTC address 2 has nothing to do with selling. BTC to ETH or BTC to any altcoin is considered "selling" BTC and buying the altcoin. That's new in 2018. Hope that helps. Chris Bell BELL Token
Okay so let me be clear, i have been doing trading recently, and have made like $15.00 do i actually need to report that shit to the IRS and end up paying $200 so a “professional” to do my taxes??? Someone who knows please answer!
Hi No Name, perhaps, you could create a wallet anonymously, and then accept bitcoins from a friend, in which you're correct, you'd be quite anonymous. The problem is when you have to sign up on an exchange online with all of your personal information, then send your bitcoins to your address and everything can be traced from the exchange to your address and to future addresses. Also, if you use a credit card online to buy bitcoins you'll be far less anonymous than you think. However, to remain secretive about it, simply avoid exchanges and using credit cards. Hope that helps! Chris Bell - BELL Token
I have made a lot of purchases in this month after 1st january 2018. I have sent everything to my friend overseas and he trades with that and gives me some commission. Can you please let me know about how do I file taxes in this case?
Hey Kevin, thanks for the information. I ended up going to bitcoin.tax where you can find crypto accountants/tax professionals. Ended up using Matt Metras in NY at bitcointaxes.me/
I am in numerous exchanges including international so it ended up getting too much to do it myself. He did a great job and is very knowledgeable on the crypto.
As long as you know how to download the csv file from each of your exchanges it is pretty quick. Getting the work to him was pretty simple and then turnaround was about 2 weeks. Depends how busy he is getting now with tax season.
BillPA18052 he seemed well priced and it was pretty easy just sent him all my CSV files and he sorted it. I had a decent amount of transactions, did a lot of alt trading. It was good to get it in line for my tax return. This year I’m going to try keep track myself.
Hi! Kevin. It s a nice Video! I have a question. What are the rules on sending as a gift from US ( I am a greencard holder, nota citizen ) to another country? to my relatives? or to my parents? Do I still pay tax on that? Do I still have to report? Do I have a limit?
confused about BTC ratio vs Equivalent BTC. In the 6 ETH trade what does 0.075 represent? that 1 ETH is worth .075 BTC? so, 6 ETH is worth .45 BTC? what is the value in calculating this 0.45 number? Couldn't formula just use the ETH qty and BTC ratio? Such as (6*.075*$10,000)...etc ? Or is this just there for visual ease?
Thanks for this video. Pretty much did the job of convincing me not to even consider high numbers of trades lol.
Serious question though. What if you bought ETH for USD direct instead of BTC for USD and then ETH for BTC? That would just be a simple cost base. But if later you bought let's say altCoin1 for ETH and later some altCoin1 for BTC so now you have altCoin1 purchased using a mix of ETH and BTC. Then and at some point later traded altCoin1 for BTC. and then that BTC for USD to cash out. Do you have to somehow track what parts of your altCoin1 qty was from the original ETH/USD cost base and which was from BTC/USD?
Question, so if I do a coin to coin trade and made profits, but I dont cash it out to USD, I report it for year 2018 of the profits. Then 2 years later, I cash out my coins for year 2019, does that mean I would be paying taxes on the amount I initially invested in by 2x? I first paid taxes on the net profit for a coin to coin trade, then taxes again when I cash out in 2 years for a long term hold. That doesnt seem fair.
How are you handling the BTC price on days where the trade happened in the same day candle? I'm just in the beginning process of making my spreadsheet right now, before I get so many trades across so many exchanges it becomes a nightmare to deal with.
Great information and really appreciate your honesty and tech in the video. Day trading just gets harder and harder going over to the hodlers side, far less headache and it seems far more effective at this point. Buying and hodling, if it gets to a good price I will sell....
ahhh well yea if the coin didnt appreciate/depreciate in that time span i think you should be ok. BUT that's only if you claim Last In First Out to designate which of your coins you are using to make the trade.
Why do i report something that i havent actually gotten into my bank acckunt yet? What happens if i reported a gain after trading and a day affer that the altcoin i traded it with crashes to 0 dollars?????
How I should pay taxes on Ponzy scheme? In case project disappear.
IRS doesn't say what is crypto what is not. The use definition "similar to bitcoin" If we take a look at ripple it's opposite to bitcoin.( it's not decentralized and no limit of coins, actually it's even not a blockchain)
this is crazy, im dont trading. I have so many transactions from nov 2017 to now, and i dont even day trade. Just sitting on what i have.
Does anyone know, since the law was approved in 2017, is it applicable only for 2018, meaning in 2019 only we need to report?
So it's doesn't recognize it not being a currency but treats is as property but not actual property when trading like for like am I the only one seeing this bullshit that the irs make up..They just trying to tax on everything...They don't on the internet!
I have not researched this issue extensively, but I intend to report what I bought in 2017 and that I am holding it. This way I will have a definitive number as of 12-31-2017 that I do not intend to fool with.
HOWEVER......when it was stated "First-in First-out" was used in the example, this did not make sense to me. The "first-in" cryptos, if you did well, would show much larger gains than the most recent ones purchased.....so my question is, "Will the IRS will let you choose the "Last-in First-out" methodology?" Under this scenario, there would be very little gains showing.....and possibly even losses. I would be happy to consistently do it that way........
That is a very true statement, but in my case (small time trader), I pick something up on GDAX, and in a relatively short time, take it to Binance, and do that trade. So, I figure that I can get smacked for a 35% tax on, like five bucks, assuming what I have purchased did not shoot to the moon in five minutes of time. I want to isolate what I got in 2017, since I am looking at a longer time frame to hold. For me, I think this would be the cheapest possible way to go. Instead of paying a tax on something I had for a while (big increase in value), I'd rather pay more tax on something I just bought 5 minutes earlier that really didn't change in value....
On a side note, I did see a guy who did all his 2017 taxes like we will have to do them in 2018, because he didn't think the "like-for-like" covered Cryptos.....and his accountant agreed. He said it cost him more than he made at his job last year!
I do not know how this will ultimately pan out, tax-wise....Imagine the guy using a trade-bot, doing a thousand transactions a day.....they'll have to cut down all the redwoods to document that...and will the IRS be hiring tens of thousands of compliance officers? Just a foolish tax decision this government has made....and it was made out of ignorance and proper study of the ramifications for the agency itself. But at least they have legitimized Cryptocurrency. Sorry to blather on...................
Thanks for your videos but I am really confused with that .. I am able to pay for each taxable event , but my question is , i haven’t gotten any of my profits yet (by selling my coins ) I just do exchanges from BTC to a different coin, so , what if at the end of the year I decide to sell all my cryptos and I realized that I didn’t get enough profits because the coins went down ( an example that I don’t want it happens ) , and I paid so much money to the IRS the actual year, and I realize That I didn’t get any profit but loss, will I get a tax return from IRS? That’s not fair , I thought you only pay taxes of your profits once you sell your cryptos . But why for every exchange ? A way to steal our money .
So where I am going to get my money from? to pay those taxable events ? If I haven’t sold anything ???
If you buy 1 btc and X coin is the same price then 1btc is now 3x higher but x coin is 2x and you made money you actually took a lost from the initial transfer from btc :) let’s see how the IRS handles that because it’s coming
2 questions here. First is will our trades we made in 2017 have to be reported or does it start in 2018? Second question, I make a ton of small trades each day some at little to no profit will I be screwed?
At a coin at a time, so I put how much have I’ve gained/loss. Price then price now... hold those gains on a note.... buy next coin... calculate those gains and losses.... from the already “taxed” profits from my last coin/token.... add the total gains up.. it kind of makes sense but please IRS send me a form saying what I owe out of total gains.... you’re a pain in the rear....
Any thought as to how it's taxed? Am I taxed at each payout? Am I taxed only when the funds are actually back in my BTC wallet? On HashFlare they hold your BTC until you reach 0.05 BTC. Then and only then can you withdraw it and send it back to your BTC wallet. I'm also thinking the maintenance fee and upfront contract has to somehow come into play to actually figure out gain or loss. Would be interested in more specific information as it relates to cloud mining or mining with your own rig in a pool. Like the video, btw!
This is so messed up! Stupid country. Time to move out! Being American Doesn't benefit in any damn way! At least in Europe there are plenty of options to hook your wallet to debit card and use cash. No one cam keep track of that. Random wallets exist everywhere.
Video suggests BitcoinTax website for calculating tax. I paid $20 for unlimited and tried the website before coming and watching this video. Their calculation of my gain/net balance is completely wrong. It shows net balance, which is 5x times more than my actual balance. So be aware. Anyhow, thanks and TU for great video! I will be forwarding this video to another friend who asked me how to calculate.
I think Cointracking can help a bit with managing this mess, it does most of the math for you. There's a fee after 200 trades though. This entire situation is only a problem if you don't know what you are doing, so educate yourselves and you'll be fine. I think it's bullshit what their doing though. I think this is going to keep people from getting involve with crypto currencies which is a shame being that trading in this market (if you know what you're doing) can put a nice chunk of money in your actual wallet.
So if I trade ETH for BTC on Binance which has its headquarters based in Shanghai, do I need to pay taxes on that trade if it "technically" was traded in China and also since it wasn't even traded for US currency? Sorry if that's a dumb question, I'm still a little confused on a few aspects of this ridiculous tax code
wait so so i have currently 8,000 in a alt coin and the coin skyrockets and i end up turning my 8,000 into 100,000 -- would be nice but how much would i have to pay on something like that. i know for year and up (long term holds) can only be up to 24% from what i heard and short term is up to 39%. So say i take it out as a short term how much would i get taxed off that?
Correct. The actual tax rate would depend on your tax bracket. If you hold the coin for more than one year, I believe the long term capital gains tax rate would apply which may be substantially lower. However, please double check all of this.
I'm thinking it would be possible to set up an Excel spread sheet that can accurately track, and calculate all transactions for each year by programming data from the blockchains into the spread sheet cells, and then simply plugging in your wallet addresses...... If I can think this up, I'm certain that the IRS has already done it.
The problem with tracking crypto currency trading is two fold, due to the volatility, you would need to track the price of both currencies you are exchanging, if you buy bitcoin, and then a week later you trade for litecoin, you would need to factor in the price change in litecoin from the time you purchased the Bitcoin in order to calculate your gains/losses accurately..... Relative to the U.S dollar, the value of both crypto currencies in question are fluctuating independent of each other.... The first ones to get some software out there that can track, and calculate these transactions is gonna make a fuck ton of money!
I did a little digging, and concluded that crypto currency trades don't count, what counts is how much you gain, or lose in USD (assuming you're using USD), that's all the tax man cares about.
Good video, but how exactly do you figure out the cost basis for the BTC you used to buy an alt coin with? This is a serious question. The BTC used is an accumulation of BTC from many different sources, e.g. previous alt coin sales, transfer from other exchanges, purchase of BTC with new fiat, etc. One alt coin sale that generates BTC may be split up into multiple different trades at different BTC amounts. Also, each BTC accumulation is acquired at different USD prices. This is the real issue that nobody is addressing. In addition to this, there is no gain or loss when cryptos are exchanged since they are of equal value at the time of the exchange. https://www.youtube.com/watch?v=q5VCq3pX3ys
Yes and No. If you converted any crypto into dollars in 2017, you report that only, just like it was real estate. This new law, reporting on ANY trade because cryptos are now intangible property, goes into affect as of Jan 1 2018.
The 16th Amendment to the Constitution was ratified on February 3, 1913 and says: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration."
You couldn't be more wrong.
If you go to a casino and win at one table or a machine then go to a another with your winnings you are not taxed until you cash out .crypto is a gamble and it can be lost or stollen and it has no value till you get it back to fiat currency .
Well, this work should at least be half-made already if ur a trader, since ur gotta calculate ur gains, otherwise ur totally lost. But most important, what will be the percentage of that cut?! will it still be worth it? Here in Brazil politicians are planning to just ban it, like China did, cause the government wanna have total control of ur money.
So then let's say I trade some btc for eth right now (Before Jan 1st), is my trade still considered a taxable evrnt that i have to report on my taxes in the next few months? Or do I only have to keep track of trades that happen in 2018 and onward?
It seems like any transaction. Is taxable. Not when you cash out from exchange to fiat into your bank account. If I send you crypto then that is a taxable event. If I send you crypto and it atomic swaps 2 times before it gets to you then each swap is a taxable event. So if I send you crypto with an atomic swaps that could be 4 taxable events. If you trade btc for ltc then that is taxable. I wish it was how you say.
The key point here is that you pay USD to IRS based on "capital" gains when you "sell" for USD. If he sold items 1&2, circled in red in the video, for "USD" then he would pay that USD as calculated to IRS. Of course taking into consideration witholdings etc. If he sold all of the "taxable events" shown on his spread sheet for USD before end of year, then he would be liable to pay $6,421. However, if only a portion of his portfolio is sold for USD then only a portion of that $6,421 would need to be paid in USD to the IRS. This might make for a good follow up video. I'M NOT A CPA OR FINANCIAL ADVISER :-)"
If i traded ethereum to ripple what would be taxed on there if i hodl it? Im so confused because when u trade, the ethereum trading to ripple(for example) , how will there be a gain or loss there if im just going to convert ethereum to ripple and hodl it for 1 year or so?
I believe that the taxable event would be the difference in price between when you purchased the Ethereum and when you converted it to Ripple. If the Ethereum was worth less when you exchanged it for the Ripple then that would be a LOSS to SUBTRACT. The taxes on Ripple would kick in only when you do something with that.
The IRS views this as two separate transactions. The first transaction is the sale of ETH for USD. This creates either a gain or loss. The gain would be taxable. The second transaction is the purchase of XRP for USD. This is not a taxable event until you trade or sell the XRP.
Have you compared whether LIFO or specific id would result in less tax for your examples? My goal is buy and hold. But Im going to be taxed at higher shortterm cap gains tax rate when I use ETH to buy altcoins in Binance. Given this Im leaninng towards using specific id. Also Binance seems to have lower prices thsn GDAX and Gemini.
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