What is crypto tax?
Crypto tax means levying a certain amount of profit from crypto trading. The crypto tax rate could vary depending on trading durations, but it usually falls between 0 and 37%.
For example, you make a profit of $10,000 from Bitcoin trading. The government considers this $10,000 as a capital gain similar to stock & bonds.
Say the US government charges a 30% crypto tax. So, the tax amount would be $3,000 ($10,000×30%) & you will get 70%, i.e., $7,000.
Crypto tax events?
We often struggled to understand which events would fall under crypto tax. Below, the table gives a detailed description of what incidents would fall under tax and which would not.
| Events | Crypto Tax |
| Simply holding crypto | Not taxable |
| Selling crypto within 1 years | If it makes a profit, it would be considered as a capital gain & charge crypto tax. The tax rate could range between 10% to 37% |
| Selling crypto after 1 years | If it makes a profit, it would be considered as a capital gain & charge crypto tax. The tax rate could be between 0% to 20% |
| Short vs. long-term trading | The crypto tax rate is comparatively lower for long-term selling than for short-term. |
| Spending crypto | The crypto tax imposes the difference between buying price & spending value as capital gains. |
| If loss occur | No tax will charge |
Tax on short term crypto gains?
A short-term crypto tax means charging a certain percentage of your profit from selling crypto within one year. Depending on your income, the tax rate could range between 10% and 37%.
Say Michael sold crypto within 1 year & made a $5,000 profit. So, the government will charge 10% of $5,000, which would be $5,00. The remaining 90%, i.e., $4,500, will get Michael.
Crypto long-term tax?
Long-term crypto tax refers to charging a certain percentage of profit from crypto trading after 1 year. It charges comparatively less tax than long-term, which could be between 0% and 20%, depending on your profit.
Say Benjamin sold crypto after 1 year & made a $20,000 profit. So, the government will charge a maximum of 20% of $20,000, which would be $4,000. The remaining 80%, i.e., $16,000, will get Benjamin.
Disclaimer
This is not a Sponsored post & the purpose of this article is only education. By reading this, you agree that the information of this blog article is not crypto investing advice. Do your own research before making any financial decision. Therefore, if you lost any money, FinanceIdeas.org will not be liable for this.
