5 Must-Have Cryptocurrency Accounting Tax Tips for 2019

by Susan Paige on November 12, 2019 · 0 comments

Are you into trading & investing cryptocurrencies? Click here for 2019’s cryptocurrency accounting tax tips you need to know before filing this year

Cryptocurrency took the financial world by storm when it emerged in 2009. Its meteoric rise and volatility have made it a very profitable venture for many individuals. 

However, cryptocurrency’s uniqueness means that it also represented a challenge to the tax season. While Bitcoin was supposed to be an anonymous currency, it is now treated as a taxable vehicle by governments around the world.

Read on for a few tips on cryptocurrency accounting that you’ll need to know for tax season. 

Cryptocurrency Is an Asset

While Bitcoin was originally designed to be a currency, the IRS has stated that it will treat it as an asset. This means that it is subjected to the same taxation and regulation as an investment.

While this may seem like a bad thing, keep in mind that capital gains tax is lower than income tax.  Depending on how much you made last year, capital gains tax ranges from zero to 20 percent

Mining Counts as a Business

However, while the above holds true for BUYING cryptocurrency, it does not count if you are mining coins yourself. Mining counts as a business, even if it is not your full-time job. 

This means that the money that you make through mining counts as income. It also means that the hardware you use for mining can be claimed on your taxes as a business expense, so capital depreciation comes into play. 

You Need to Maintain Cryptocurrency Accounting Documentation 

Just like all other investment vehicles, you need to maintain documentation that shows at what value you bought your coins and at what value you sold. This is the only way to determine just what you are taxed on. Alternatively, it also means that you can claim capital losses if you lost money on cryptocurrency in the last year, actually saving you money on your taxes. 

Value Changes Day-To-Day

In a similar vein to the above point, when determining what cryptocurrency is worth, you have to look at the value the instant that you received each amount. This means that cryptocurrency received at different times of the week, or even the day, can have wildly different values. 

This is also why it’s so important to keep meticulous records of all the cryptocurrency transactions that you are involved in. It would be a nightmare to have to work backward during tax season. 

There are Specific Times You Need to Pay Taxes

You will have to pay taxes on your cryptocurrency when you spend it. This means when you exchange it for real money, when you trade it for other cryptocurrencies, or when you use it to buy physical goods and services. For a full list of what counts as a taxable event and what does not check out this guide on coinbase taxes

Don’t Skip Your Taxes

The worst thing that you can do is skip reporting the money you’ve made through Bitcoin on your taxes. Penalties for tax evasion can be quite high, which is why you have to be diligent about your cryptocurrency accounting practices. 

For more information about personal finance and taxes, check out the rest of our blog!

{ 0 comments… add one now }

Leave a Comment

Previous post:

Next post: