Is Crypto Taxed the same as Stock?

Investing in cryptocurrency may be a great tax-free way to put your money to work. But if you trade crypto for crypto using a platform like Coinbase, the IRS could consider this bartering, not investing. This could result in some hefty taxes on the profits you made when purchasing and selling cryptocurrencies—especially if those assets did very well for you. In other words, if you buy one bitcoin at $1,000 and sell it a few weeks later at $2,000, you’ll have to pay taxes on the $1,000 of profit.

Now, if you’re a crypto day trader or have made significant profits from cryptocurrency investments, you may be subject to a capital gains tax. Capital gains taxes are based on the fair market value of an asset when it was purchased as well as the amount of time it was held. This can make some cryptocurrency tax calculations tricky because there is no regulation that mandates cryptocurrency exchanges report to avoid these calculations; many users use crypto tax software.

Crypto tax software in India is considered as the best choice to maintain the record of all types of crypto currency and hence it minimises the efforts. 

Cryptocurrency investors may be able to use methods like FIFO and “average cost” to calculate their capital gain taxes as well. Coinbase and other exchanges offer users the ability to purchase and sell digital assets at what seems to be the current market rate. Investors can use this information to calculate the number of days they held their assets and then apply that value to a tax formula like an average cost basis. In other words, if you’re holding coins for longer than a year, you may want to sell them so that you can claim long-term capital gains instead of short-term ones.

How to avoid income tax on crypto ?

If you hold your coins on an exchange, those exchanges are required to report the value of cryptocurrency to the IRS. The IRS will then take this value and multiply it by a capital gains tax rate, which varies depending on how long you have owned the digital currency and at what cost. If you held your coins for less than a year, then your taxes will be based on short term capital gains rates. If you held them for more than a year, then your taxes will be based on long term capital gains rates.

These taxes are differ for different countries. For example there is less crypto tax in India in comparison to other countries. So to avoid being taxed on crypto assets that were purchased with USD or any other fiat currency, it is possible to simply not report these transactions. The best way to do this is to report a loss on the transaction, which can be done using form 8949. This form will detail how much you sold the coin for and then state any losses that you incurred when selling.

Apart from this, if you need any help related to this field or if you have any query related to crypto taxes or any other doubt then I will suggest you to visit Binocs. Binocs is a cryptocurrency portfolio software which helps you to manage your cryptocurrency.