Opinion: June 13, 2021. What to Keep in Mind Regarding Taxes When Selling Cryptocurrency

The sale of cryptocurrency is a taxable event. In the United States cryptocurrencies are considered assets so they are subject to capital gain (loss) taxes.

The first thing to keep in mind is that that tax rates are different if you hold the asset for less or more than a year. If you hold the asset for less than a year you would be subject to short tern capital gain (loss) taxes and this rate is usually higher than the long term capital gain (loss) taxes. This means that you will need to have careful record regarding the purchase dates and the sale dates.

The second thing that you have to keep in mind is that you will be taxed on the net profit (the total sale minus the cost basis), not on the total sale value. The tax rate varies according to your tax bracket.

The third item is that you have to include the fees incurred in buying and selling the cryptocurrency in your cost basis.

The fourth thing you have to keep in mind is that exchanges and wallets will not generate documents like a bank does, so the record keeping has to be personal, detailed and clear. You do not want an ugly surprise in the future, if the IRS audits your tax returns.

This post is intended to only raise awareness. In order to make actual financial decisions please contact your financial advisor or tax advisor prior to making the decision.

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