Crypto Taxes for 2023 | Bitcoin Taxes Rules
By:C, Fiona
How cryptocurrencies are taxed depends on how and when they were acquired.
Hardly the most riveting topic, but understanding how taxes work with digital currencies is essential if you plan to invest in them. Despite the relative novelty of cryptocurrencies, the IRS is making significant efforts to ensure that crypto tax compliance is met.
Several actions involving bitcoin can trigger tax obligations, including exchanging one cryptocurrency for another. Gains from the sale of other types of digital assets, such as non-fungible tokens, are also subject to taxation (NFTs). It can be difficult to reconstruct your profits and losses for tax purposes if you haven’t kept detailed records. Even if you had a genuine oversight and forgot to pay your cryptocurrency taxes, you could be subject to hefty fines.
What are Crypto Taxes?
The Internal Revenue Service (IRS) has determined that most cryptocurrencies are usable virtual currencies. This means that they can be used as a means of payment, a way of holding value, a unit of account, and as a medium of exchange, just like actual money.
Any gains or income you make through bitcoin are likewise subject to taxation. There is a lot of nuance to bitcoin taxation, since you might or might not have to pay taxes depending on your specific circumstances. Knowing when you will be taxed as a cryptocurrency owner or user is crucial so that you are not caught off guard by the Internal Revenue Service.
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How do Crypto Taxes Work?
How and when you pay taxes on your bitcoin holdings will vary.
Gains from selling cryptocurrency are taxable at the rate of your country’s income tax on the difference between what you paid for the cryptocurrency and what you got from selling it. Keep in mind that this does not just refer to the sale of cryptocurrency for fiat currency, but also the direct exchange of one cryptocurrency for another, as well as the use of cryptocurrency to pay for products and services.
But, the specifics of how crypto taxes are computed will vary according on your individual situation. The nutshell version is as follows:
- If you obtained cryptocurrency through mining or as payment for products or services, its value is instantly taxable as earned income. You do not wait to pay the IRS until you sell, trade, or utilize it.
- If you disposed of or used bitcoin by selling it on an exchange, purchasing goods or services, or swapping it for another cryptocurrency, you will owe taxes if the realized value exceeds the purchase price. A capital gain may be subject to either short-term or long-term tax rates.
Tax expert Brian Harris of Fogarty Mueller Harris, PLLC in Tampa, Florida, believes that buying and selling cryptocurrency results in some of the same tax repercussions as more conventional assets like real estate or stock.
According to Harris, “the value… rises and falls, and if you sell or exchange that property, then you have capital gain or loss, based on how that value has moved.”
Whar Factors Determine the Tax Rate?
You will be subject to taxation on any gains you made through trading cryptocurrencies, with the rate being determined by the following factors:
- How long you were the owner prior to selling. If you held cryptocurrency for less than a year before selling it, you will be subject to higher rates, between 10% to 37%. If you have owned the cryptocurrency for over a year, your rates will range from 0% to 20%.
- Your annual salary in its whole. Those with the greatest incomes are subject to the highest tax rates.
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Crypto Tax Rates for 2023
When filing your taxes in 2023, the following long-term cryptocurrency tax rates will apply:
| TAX RATE | SINGLE | MARRIED FILING JOINTLY | HEAD OF HOUSEHOLD |
|---|---|---|---|
| 0% | $0-$44,625 | $0-$89,250 | $0-$59,750 |
| 15% | $44,626-$492,300 | $89,251-$553,850 | $59,751-$523,050 |
| 20% | >$492,300 | >$553,850 | >$523,050 |
For this reason, any gains made on cryptocurrency held for less than a year are treated as ordinary income by the IRS. Gains from cryptocurrency kept for less than a year will be subject to the following income tax rates in 2023:
| TAX RATE | SINGLE | MARRIED FILING JOINTLY | HEAD OF HOUSEHOLD |
|---|---|---|---|
| 10% | $0-$11,000 | $0-$22,000 | $0-$15,700 |
| 12% | $11,001-$44,725 | $22,001-$89,450 | $15,701-$59,850 |
| 22% | $44,726-$95,375 | $89,451-$190,750 | $59,851-$95,350 |
| 24% | $95,376-$182,100 | $190,751-$364,200 | $95,351-$182,100 |
| 32% | $182,101-$231,250 | $364,201-$462,500 | $182,101-$231,250 |
| 35% | $231,251-$578,125 | $462,501-$693,750 | $231,251-$578,100 |
| 37% | >$578,125 | >$693,750 | >$578,100 |
FAQs:
1.What are some strategies for paying as little tax as possible?
There is also the option of waiting longer than a year to cash out crypto. The interest rates are lower if you keep the property for more than a year.
2.How is cryptocurrency taxed?
Any profits made from the sale of cryptocurrency are subject to the same long-term and short-term capital gains rates as those applied to the sale of stocks.
Cryptocurrency earnings should be included in yearly earnings if mined or staked, or if paid in cryptocurrency by a business or client.
3.What if you lose money when selling crypto?
A loss from selling cryptocurrency for less than you paid for it might be used to reduce the gain from selling additional coins.
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Why Trade Crypto Futures on BTCC
To trade Crypto futures, you can choose BTCC crypto exchange.BTCC, a cryptocurrency exchange situated in Europe, was founded in June 2011 with the goal of making crypto trading reliable and accessible to everyone. Over 11 years of providing crypto futures trading services. 0 security incidents. Market-leading liquidity.
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FAQs
1.Is BTCC safe?
Since its inception in 2011, BTCC has made it a priority to create a secure space for all of its visitors. Measures consist of things like a robust verification process, two-factor authentication, etc. It is considered one of the most secure markets to buy and sell cryptocurrencies and other digital assets.
2.Is it possible for me to invest in BTCC?
Users are encouraged to check if the exchange delivers to their area. Investors in BTCC must be able to deal in US dollars.
3.Can I Trade BTCC in the U.S?
Yes, US-based investors can begin trading on BTCC and access the thriving crypto asset secondary market to buy, sell, and trade cryptocurrencies.
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