The tax rules in dealing with cryptocurrency are constantly evolving and changing. One item that I found interesting was the treatment of inactive cryptocurrency and taxes. Bitira.com released an article titled Crypto Tax Questions 2020 that discusses this topic. If you thought anything like me, you would would wonder why worry about taxes on cryptocurrency assets that are being held by you, in cold storage or on an exchange. The article referenced provide some examples and situations to plan for and how to address them.
Bitira.com bought together several crypto tax experts to discuss the subject of cryptocurrency inactivity.
“I didn’t sell any of my coins in 2019, do I still have to pay taxes?”
David Kemmerer, of CryptoTrader.Tax says that reporting on certain cryptocurrency transactions may need to be reported on IRS Form 8949, Sales and other Dispositions of Capital Assets. Those transactions may be trading one cryptocurrency for another, , mining, or earning cyyptocurrency. These transactions may be treated as income. Just holding existing coins wouldn’t create a taxable event. Additionally, Zac McClure of TokenTax handled the subject of mining , staking and receiving airdrops. The staking subject is starting to get a lot more traction, due to staking now being able to be handled on offline cold storage wallets. Zac stated that income generated from these 3 activities would need to be reported. So, keep this in mind as staking becomes more and more popular as a means of gaining passive income.
The world of cryptocurrency is changing very quickly. As more world events start to have a bearing on our everyday and financial lives, the desire to bring cryptocurrency into the mainstream will start to grow. Make sure to keep an eye on how taxes may affect your investment.
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