Tax time! How to calculate your Bitcoin and Criptovalute losses

Paying income taxes is certainly one of the least entertaining duties known to mankind. And to state that even your Bitcoin losses are considered your least memorable task of the end of 2018. However, the Internal Revenue Service (IRS) he is not an authoritarian figure to be ignored or openly challenged. An accurate and transparent account of your earnings and losses in Bitcoin and cryptocurrency will keep you away from Big Bro's list of do not do well.

The long and the short of it

Here is a very simple overview of federal income taxes applied to Bitcoin losses. Keep an accurate record of your transactions with Bitcoin and tax time will be much easier and stress free. Many companies now offer specialized tax accounting software. These digital wonders will help you automate the entire crypto tax preparation process for you at the end of the year.

An example of short-term capital loss

1. You bought $ 10,000 of BTCUSD 1 December 2017
2. BTCUSD price per unit: $ 10,000
3. Acquired BTCUSD units: 1:00
4. Transaction fees: $ 150

Cost basis: $ 10,150

1. You sold 1.00 BTCUSD unit February 5, 2018
2. BTCUSD price per unit: $ 7,500
3. Transaction fees: $ 112.50

Net income: $ 7.387.50

Subtracting net income of $ 7,387.50 from the $ 10,150 cost basis results in a short-term capital loss of $ 2,762.50.

Since you held your BTCUSD for less than a year, your loss is considered a short-term capital loss. IRS allows you to offset short-term capital gains against short-term capital losses, up to a maximum of $ 3000 per year (if you are married and you sign up separately, the annual limit is $ 1,500). If you do not have short-term gains and only short-term losses, you can still deduct them on your federal 1040 form.

An example of long-term capital loss

1. You bought $ 12,000 of BTCUSD 29 October 2017
2. BTCUSD price per unit: $ 6,000
3. Acquired BTCUSD units: 2:00
4. Transaction fees: $ 180

Cost basis: $ 12.180

1. You sold 2.00 BTCUSD unit November 20, 2018
2. BTCUSD price per unit: $ 4,500
3. Transaction fees: $ 135

Net income: $ 8.865

Subtracting the net proceeds of $ 8,865 from your cost base of $ 12,180 results in a long-term capital loss of $ 3.35 for you. Please note that you always include your commercial transaction costs. insert them at your cost basis e subtract them from your net proceeds.

Since you have held your BTCUSD for more than a year, your loss is considered a long-term loss of principal. The IRS allows you to offset long-term capital gains against long-term capital losses, up to a maximum of $ 3,000 per year (if you are married and you register separately, the annual limit is of $ 1,500). If you do not have long-term gains and only long-term losses, you can still deduct them on your federal 1040 form.

The form factor

Unless you are selling bitcoins to live via a C-Corp., S-Corp., LLC, or other business structure, you'll only need to fill out some forms at the time of tax. If you trade part-time (non-professional) Bitcoin and manage an asset, there are also quarterly estimated tax payments to be made. Here is a look at what you will need to properly prepare your taxes:

• Your broker or exchange Form 1099-B. Generally available after January 31st.
• Your monthly statements. Use them to check the accuracy of your Form 1099-B. You should also save every business confirmation notice and make sure it is in agreement with your monthly statement.
• You will need Form 8949 (Sales and other disposals of assets) to list all the Bitcoin exchanges made during the fiscal year. Use an 8949 form to list short-term capital gains and losses. Use another to list long-term capital gains and losses.
• You will also need to Timetable D (Capital gains and losses) to import information from forms 8949. This form will mark short- and long-term capital gains and losses. It also determines whether it is allowed to deduct capital losses from ordinary income (on Form 1040).
• If you are self-employed and you also anticipate significant gains or losses in Bitcoin trading for the tax year, be sure to include estimated gains or losses on your account. Form 1040 ES. When you send your quarterly tax payment coupons to the IRS (January, April, June, September), the figures you entered in the 1040 ES form will help you avoid under-payment or overpayment of your tax liability Federal.
• Even if you are NOT self-employed, you may still need to use the same Form 1040 ES calculations if you expect large gains or losses in your Bitcoin trading. It is always better to make accurate quarterly tax payments. Waiting until April 15 to calculate your annual federal bill can cost you big fines and penalties. Especially if you owe the IRS a significant amount of taxes.

Claiming your Bitcoin losses

Trading and investment losses are a reality that all Bitcoin market participants have to contend with. At the end of the fiscal year, the statements and the 1099-B form will depict a rigorous and honest evaluation of your cryptographic talents. Or the lack of them! Use this annual alarm to refine your trading and investment strategies.

You should also use it to help set realistic financial goals for the next fiscal year. For example, maybe your short-term Bitcoin exchanges (swing trading) are better than your long-term results. If so, perhaps it is better to exchange via a short-term mechanical system rather than speculate for the long haul. Or maybe even vice versa, if your short-term business results are a disaster, but your long-term exchanges deliver the goods constantly.

Silver coatings

Obviously, the good news is that all Bitcoin losses, regardless of size, can be used to offset Bitcoin's gains. Say 2019 turns out to be a great year of Bitcoin earnings for you. Earn $ 20,000 in short-term Bitcoin capital gains, trading several times in the year. If you've had $ 5,000 in short-term Bitcoin losses in 2018, you can bring $ 3,000 of those losses up until 2019. So, reduce your short-term 2019 gains from $ 20,000 to $ 17,000. And if you do well in 2020 and earn $ 10,000 in short-term Bitcoin, you can take the remaining $ 2,000 in short-term losses in 2018 and reduce your short-term taxable profits in 2020 to $ 8,000. Bada bing.

There is really a silver lining in every cloud.

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