2018 was one of the worst years for cryptocurrency investors as the price of bitcoin along with other major altcoins has been bearish since the start of the year. Last month the bitcoin was trading at the annual low of around $ 3200, catching up a little later this month. However, apart from the huge losses investors may have to face, there could be a positive side to the market crash for US citizens.
If you are a citizen of the United States and know how to properly record and file your taxation, you will probably save a good amount of tax this year. Under the US Tax Code, bitcoins or other cryptocurrency investors who have suffered huge losses this year can use these losses to resettle the tax burden for the current financial year and beyond.
According to the US Internal Revenue Service or the IRS, cryptocurrencies are treated as commodities and are therefore taxed according to the way sales of land, inventories and assets are treated.
Regulations of US domestic tax services:
The cryptocurrency is taxed according to the Capital Gains Tax for which the highest amount of the tax rate for long-term gains is 40.8% and for short-term gains is equal to 23 , 8%. Tax is imposed when a particular asset such as a cryptocurrency is sold at a higher value than the purchase price. For example, if a cryptocurrency investor bought 1 bitcoin for $ 1000 in 2017 and sold the bitcoin for $ 4,000 today, it will be taxed on the amount of the gain, or $ 3,000.
On the other hand, if you are facing a loss in the cryptocurrency market, ie if you bought 1 bitcoin to $ 18,000 last year and sold it today to $ 4000, then the amount of loss, that is, $ 14,000, may be required for its overall tax burden on its investments in commodities along with its personal income tax which has a limit of up to $ 3,000 per financial year. Furthermore, as an investor you can continue the losses of the current year also in the next financial year.
The best part is that cryptocurrencies are not subject to "wash-salt" regulations that make any cryptocurrency investor legal to sell only a part of their cryptocurrency investments to record losses on the Internal Revenue Service and only a few hours later to buy back the same good again.
Cryptocurrency investors in the United States should record all of their financial cryptocurrency trading activities accurately and in detail to take advantage of the current regulatory framework. There are numerous amounts of cryptocurrency accounting software available online that can be of help.
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