I am not a financial advisor. This post is to provide information and not provide financial product advice. I discuss why I personally chose to invest in a stock, ETF, REIT, investment fund or cryptocurrency (which I have held for over a week) and also share information that is public about the following stock, ETF, REIT, investment fund or cryptocurrency and they are based on my own personal opinion.
I will not blog about any positions of stocks, ETFs or REITS and cryptocurrency which were initiated just within the last 72 hours of posting this blog article.
It is recommended that you should always consider visiting a financial advisor for independent financial advice before making investment decisions.
I do not work in the financial industry, so just because I write about it, doesn’t mean you should own it. So, consult with a financial advisor and do your due diligence, RESEARCH!
I am not receiving compensation by the company for this blog post.
I have no working relationship with any company whose stock, ETF, REIT or cryptocurrency mentioned in this blog post. Nor do I have a family member or friend who works with the company.
The following is for those paying taxes in the United States. If you live in another country, please check your country’s tax laws on cryptocurrency.
On various cryptocurrency forums, I noticed a lot of people who are unclear about paying taxes on cryptocurrency sales.
Cryptocurrency is treated as property and is taxed accordingly. This was addressed by the Internal Revenue Service in its notice 2014-21.
In fact, in July 2019, the IRS sent warning letters in July 2019 to more than 10,000 taxpayers who are suspected of “potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly”.
I’ve read people who said they didn’t have to pay it because they haven’t made more than $14,000 of cryptocurrency income. And not many people realize that they have to include it with their own personal income.
If you sold cryptocurrency, mined cryptocurrency, you are going to be taxed.
And to save you the time and effort of going through your cryptocurrency exchange’s reports, it’s always smart that may it be cryptocurrency or selling a stock or ETF, have it on a spreadsheet!
Because it’s one thing to show your capital gains, but it’s also important to showcase your capital losses (which helps offset your capital gains).
To make it easy for my accountant, I have a spreadsheet as follows:
NAME | Amount Acquired | Date Acquired | Date Sold | Purchased For | Price Per Coin | Gain | Loss | Earned | Fees | Proceeds
So, here is an example. Let’s say I sold Cardano for a profit and ANKR for a loss for the entire year.
| NAME | Amount Acquired | Date Acquired | Date Sold | Purchased for | Price Per Coin | Gain | Loss | Earned | Fee | Proceeds |
| Cardano | 50.48 ADA | 4/18/2021 | 6/3/2021 | $63.04 | $9.31 | $41.45 | $104.49 | -$2.99 | $38.46 |
As you can see, from the example, I purchased it at 50.48 ADA for $63.04 and sold at $104.49. What you are paying for taxes is the gain, so I made $41.45 on that sale and you can subtract the exchange fee of -$2.99 and so overall, I made $38.46 of profit.
| NAME | Amount Acquired | Date Acquired | Date Sold | Purchased for | Price Per Coin | Gain | Loss | Earned | Fee | Proceeds |
| ANKR | 1144.313 ANKR | 4/16/2021 | 5/18/2021 | $190.57 | $0.14 | -$162.14 | -$28.43 | -$2.99 | -$31.42 |
But with ANKR, If you bought it at $190.57 but sold it all at $162.14., but then you have to add the -$2.99 fee and the total was $159.15. That was a loss of $31.42.
So, you report on your taxes that you made a profit of $38.46 with ADA but you lost $31.42 of ANKR, so your capital losses reduces your capital gain and the profit for cryptocurrency was $7.04.
So, in addition to your income tax form, you’re going to add that you had $7.04 of income. Not a whole lot right? But imagine those who sold off Bitcoin or even with Doge and made thousands, hundreds of thousands or millions of dollars. This is where keeping good records of your capital gains and capital losses become important.
Also, it will save you the time and effort because let’s say you get a report from Coinbase, the way the figures are presented in the report, you’re probably going to have to input it in a spreadsheet because you’re going to have to add up your gains and losses. Otherwise, if you report only your gains and no losses, if you made good money with crypto, prepare to pay a lot in taxes.
But let’s say that you are staking your cryptocurrency or in Coinbase, you are doing “Lifetime Rewards”. If you were gifted cryptocurrency (via taking the quiz) and also are earning lifetime rewards, that is also considered as income. If you have been earning passive income on BlockFi, that is also taxed.
Now similar to stocks, if you hold onto crypto for less than a year before selling it, this is “Short-Term Capital Gains” and you will be taxed the normal income tax rate.
If you held crypt for one year or more, any profit would be “Long-Term Capital Gains” and you will be taxed at a lower rate.
Just remember! Any income or passive income you earn from cryptocurrency need to be taxed. So, definitely keep good records each time you bought and sold crypto.
