Do you mine or trade crypto? If so, you should know how to report crypto on taxes.
Tax season for crypto transactions began in April. Now is the perfect time to learn about crypto taxes and how to report your transactions if you participated in crypto transactions this past year.
Keep reading to learn all about crypto taxes and what to do if you participate in cryptocurrencies.
Calculate Total Capital Gains and Losses
If you have sold or exchanged cryptocurrency during the year, you will need to know how to report crypto on taxes. To calculate your total capital gains or losses, you will need to find the cost basis of each asset.
The cost basis is the original value of the asset, plus any associated fees. Once you have your cost basis, you will then subtract any losses from your total gains to get your net gain or loss for the year.
Report Crypto Income
In order to report your cryptocurrency income on your taxes, you will need to include it as part of your total income. This includes any income from mining, trading, or selling cryptocurrency.
You will need to calculate the fair market value of the cryptocurrency at the time you received it and report this amount on your taxes. Be sure to keep accurate records of all cryptocurrency transactions, as these will be necessary in order to correctly report your income.
Complete IRS Form
Cryptocurrencies are considered property, not currency, by the IRS.
This means that you’ll need to report any gains or losses from buying, selling, or trading cryptocurrency taxes. You’ll also need to incorporate any income from mining or staking into your gross income.
To get started, you’ll need to fill out IRS Form 8949, which is used for reporting capital gains and losses. You’ll need to include information such as the date of purchase, sale, or trade, the cost basis of the transaction, and the proceeds from the sale.
If you have multiple transactions, you’ll need to provide a separate Form 8949 for each one.
Passive Income Tax Exemption
When it comes to taxes, there are a few things you need to keep in mind when it comes to reporting your crypto. First and foremost, any and all revenue generated from your crypto holdings are considered taxable income.
This means that you need to report it on your taxes. However, there is a silver lining.
If you can prove that your crypto holdings are being used for passive income purposes, then you may be eligible for a passive income tax exemption. This exemption can be a huge saving grace, so be sure to do your research and consult with a tax professional to see if you qualify.
Know How to Report Crypto on Taxes
If you’re not sure how to report crypto on taxes, keep track of all your cryptocurrency transactions. This includes buying, selling, trading, and spending cryptocurrency.
Report your gains and losses from cryptocurrency transactions on your tax return. Make sure to keep good records so that you can answer any questions the IRS may have.
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