Crypto or cryptocurrency is a digital asset that uses cryptographic technology to secure transactions and control the creation of new units. Crypto is increasingly popular as an investment and payment alternative in the digital world.
However, many people don't know how to pay crypto taxes in their country. This article will explain how to pay crypto taxes in the US, UK, and Germany, as well as tips and tricks to save on your crypto taxes.
Crypto Taxes in the US
In the US, the Internal Revenue Service (IRS) classifies crypto as property (not currency). Thus, purchases and sales of crypto are taxed as capital gains or losses.
This means that you have to pay crypto taxes every time you sell or spend crypto at a profit. If you sell or spend crypto at a loss, you don't have to pay taxes, but you can use your crypto losses to deduct profits from other investments.
To calculate your crypto taxes, you need to know the purchase price and sale price of your crypto, as well as the associated transaction fees. The difference between the selling price and buying price, minus transaction costs, is your capital gain or loss.
You must report your capital gain or loss on Form 8949 and Schedule D when filing your annual tax form. You should also keep a record of your crypto transactions as proof.
Your crypto tax rate depends on how long you hold your crypto before selling or spending it. If you hold crypto for less than a year, you will be taxed at ordinary income tax rates, which range from 10% to 37%.
If you hold crypto for more than a year, you will be taxed at long-term capital gains tax rates, which range from 0% to 20%, depending on your income level.
Some tips and tricks to save on your crypto taxes in the US are:
- Hold your crypto for more than a year to get a lower tax rate.
- Selling your crypto at a loss to offset the profits of your other cryptos, or even the profits of other investments such as stocks or bonds.
- Use a qualified retirement account, such as an IRA or 401(k), to invest in crypto, so you can delay or avoid taxes on your crypto.
- Avoid using crypto to purchase goods or services, as this is considered a taxable sale of crypto.
Crypto Tax in the UK
In the UK, Her Majesty's Revenue and Customs (HMRC) considers crypto to be a tradable asset, so crypto activity is taxed as capital gain or loss, or as income from trading.
This depends on whether you invest in crypto as an individual or as a business.
If you invest in crypto as an individual, you will have to pay capital gains taxes every time you sell, exchange, or give away crypto at a profit. If you sell, exchange, or give away crypto at a loss, you can use your crypto losses to offset other capital gains.
You must report your capital gains or losses on your Self Assessment tax return when completing your annual tax form. You should also keep a record of your crypto transactions as proof.
Your capital gains tax rate depends on your income level and the amount of your capital gains. If your income is less than £50,000, you will be taxed at 10% on capital gains up to £12,300, and 20% on capital gains above that.
If your income is more than £50,000, you will be taxed at 20% on your entire capital gain.
If you invest in crypto as a business, you will have to pay corporate income tax every time you sell, exchange, or give away crypto at a profit.
If you sell, exchange, or give away crypto at a loss, you can use your crypto losses to reduce your taxable income.
You must report your crypto profits or losses on your Company Tax Return when filling out your annual tax form. You should also keep a record of your crypto transactions as proof.
The corporate income tax rate is 19% for all businesses, regardless of their income level or amount of crypto profits.
Some tips and tricks to save on your crypto tax in the UK are:
- Take advantage of capital gains tax free of £12,300 per year for individuals, or £1,000,000 for small and medium businesses.
- Selling your crypto at a loss to offset your other crypto gains, or even other capital gains such as shares or property.
- Use a qualified retirement account, such as a SIPP or SSAS, to invest in crypto, so you can delay or avoid taxes on your crypto.
- Avoid using crypto to purchase goods or services, as this is considered a taxable sale of crypto.
Crypto Tax in Germany
In Germany, the Federal Ministry of Finance (BMF) considers crypto as a virtual unit of accounting equivalent to foreign currency, so crypto activity is taxed as capital gains or losses, or as income from trading.
This depends on whether you invest in crypto as an individual or as a business, as well as how long you hold your crypto before selling or spending it.
If you invest in crypto as an individual, you will have to pay capital gains taxes every time you sell or spend your crypto at a profit. However, there are exceptions if you hold crypto for more than a year, or if your crypto profits are less than €600 per year.
In this case, you don't have to pay crypto taxes at all. If you sell or spend crypto at a loss, you can use your crypto losses to offset other capital gains. You must report your capital gains or losses in Anlage SO when completing your annual tax form. You should also keep a record of your crypto transactions as proof.
Your capital gains tax rate is 25%, plus a 5.5% Solidarity Surcharge, and possibly also Church Tax, depending on your religion. So, your total capital gains tax could be up to 28.5%.
If you invest in crypto as a business, you will have to pay corporate income tax every time you sell or spend crypto at a profit, no matter how long you hold the crypto.
If you sell or spend crypto at a loss, you can use your crypto losses to reduce your taxable income. You must report your crypto profits or losses in Anlage EÜR when filling out your annual tax form. You should also keep a record of your crypto transactions as proof.
How To Buy Crypto With Bittime
You can buy and sell crypto assets in an easy and safe way via Bittime. Bittime is one of the best crypto applications in Indonesia which is officially registered with Bappbeti.
To be able to buy crypto assets on Bittime, make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into your wallet . For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application.
Monitor price chart movements of Bitcoin (BTC), Ethereum (ETH), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.
Read also:
Unveiling Cryptocurrency Scams
What Are Cryptocurrency Pairs?
DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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