The IRS has put out a reminder on tax responsibilities for cryptocurrency. In summary, you have to report transactions and pay taxes on selling, trading, or using cryptocurrency.
This section focuses on taxes, rules, and regulations regarding cryptocurrency.
Good news, if you used only Coinbase to buy and sell crypto, your tax filing just got a lot easier. Coinbase has launched new tax tools including a tax calculator.
If you bought crypto in early 2017, then traded in late 2017. Then you likely owe taxes on profits from 2017. This can pose issues given the current prices of cryptocurrency in 2018.
To summarize the tax rules for cryptocurrency in the United States, cryptocurrency is an investment property and you owe taxes when you sell, trade, or use it.
In Forex trading (foreign currency trading) there is a “first in first out” (FIFO) rule. This rule should be optional cryptocurrency.
In general, one might want to assume the rules of “like-kind property” or “like-kind 1031 exchange” do not apply to cryptocurrency.
For tax purposes, in the U.S., cryptocurrency is generally treated as property (a capital asset like stocks, bonds, and other investment properties). It is not treated as currency like the U.S. dollar.
Bitcoin is legal in the US, but it’s legality can be fuzzy in different parts of the world.