How to archive your Bitcoin profits and new earnings encrypted with IRS

The last two years have brought a lot of popularity to cryptocurrencies, and their awareness has grown as never before in the previous decade of their existence. Countless investors have begun to flood the encrypted market, and the value of coins has increased accordingly, which has only served to attract potential new investors. Prices were high and the market thrived.

Despite the fact that the situation has changed dramatically since then, one more thing remains: encrypted investors and traders still have to pay taxes on their earnings. Fortunately for them, there is good news about this situation, namely that any loss that occurred due to the bearish market trend in 2018 can still be placed in a lower tier. In fact, claiming losses is easier than many believe.

Presenting your cryptographic taxes

In the United States, as well as in many other countries around the world, cryptocurrencies are currently classified as assets. This means that any cryptography-based transaction can fall into only one of the two categories: loss of principal or capital gain.

When it comes to capital gain, it happens when an individual sells cryptocurrency for an amount higher than the amount initially paid to do so. As for the loss of capital, it occurs when traders sell some coins and tokens at a price lower than they had when they were purchased. In both cases, the assets must be sold first, in order to determine losses or taxable gains. If the losses end up being big enough, you might be able to use this situation to insert a lower level of contribution.

Loss deduction

Claiming a loss has some advantages to it, as traders can use them to offset the income that has been earned by another source or sources. Unused losses may be deducted from other types of income and may be carried over to the following year. This is how things work in the stock market, according to an article published by the New York Times, and the situation is currently the same for cryptocurrencies.

When it comes to the United States, the IRS allows citizens to deduct capital losses only up to a certain limit, which is $ 3,000 per year. This amount can be deducted from the amount that people earn in their daily work. If they lose more than $ 3,000, they can get another deduction when filing taxes next year.

Those who earn more than $ 50,000 a year, the loss of $ 3,000 can place them in the lower tax bracket, which could result in tax savings of thousands of dollars. Not only that, but those who earn income through shares or real estate sales can fundamentally have no limits to the amount they can deduct. It is possible to obtain even greater tax savings for those who are widowed or even married, but who present jointly.

What about Crypto Mining?

Similarly to traders and investors, crypto-miners can also achieve lower tax brackets through deductions. This was confirmed by the IRS notice published in March 2014, which states that when taxpayers extract cryptocurrencies, the market value of currencies is currently included in gross income.

However, if the value of the currency decreases and the miner decides to sell, they automatically trigger a capital loss which can then be reported, as explained above. In addition, IRS analysts have even reported that electricity costs and other expenses can be amortized. Not only that, but those who continue to encrypt my cryptocurrencies with the expectation of profit may, in fact, be eligible to take the deduction of section 179, which also allows them to cancel the cost of the mining platforms they had to buy to engage in the mining process.

Use of tax encryption tools

The hard part comes when investors have to calculate their earnings, especially if they are not careful enough to keep track of their trading. The same applies to those who have carried out large quantities of commercial orders in the previous year.

The calculation of losses and earnings will require access to special tax instruments, otherwise it is almost impossible to calculate how many coins were worth at the time they were purchased. However, these tools are already available and can be obtained from TaxACT, TurboTax, CSV and other providers. With them, you can import data related to your transactions from your cryptographic portfolios or exchange accounts.

Finally, it is also possible to download the IRS 8949 module which can be used to send leak reports.