Crypto Taxes: Explained

In case you are interested in investing or spending your cryptocurrencies, you need to know how these currencies are a subject of taxation.

The IRS addressed that they will tax virtual currencies a long time ago. According to their Notice, every virtual currency is treated as a property for certain federal taxes. So for example, if you own bitcoin, it can be considered as an investment property or personal property. Taxes also apply for cryptocurrencies exchanges. This can create a problem for users who use bitcoin in everyday purchases because they will be taxed every time a transaction is made.

Despite the Notice the IRS made, they showed very little explanation referring to bitcoin taxation.
One thing is for certain, virtual currencies are treated as a tax eligible property. Everything that applies for bitcoin, goes the same for every other cryptocurrency.

Trading cryptocurrencies create a taxable event. The same goes for exchanging one cryptocurrency for other, sending cryptos to other users, receiving payments for services or products and also for converting one currency into another. Not to forget that mining coins also falls under IRS taxation.

Coinbase and GDAX, for example, offer a great deal of tax refund but only to certain business users or users who received more than $20.000 for cryptocurrency sales. Other users who are not businesses, in order to get a tax refund need to save their account transaction history.
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They should always keep all the records of all the transactions made through all the exchanges in order to get as much information for your tax returns.