Making Money in Bitcoin Markets? Don’t Forget About Crypto Taxes
It feels like 2017 all over again. The price of Bitcoin surged to reach an all-time high at the end of November. As a result, anyone who bought Bitcoin right at 2017’s peak moved out of the red and back into positive gains. Prices could go even higher. The Stock-to-Flow (S&F) forecast model is showing that Bitcoin could reach $100,000 in 2021, while Bloomberg strategist Mike McGlone said that Bitcoin will surpass that figure and arrive at $170,000. On the other hand, there may be some short-term price plunges on the horizon.
Whatever happens to Bitcoin in 2021, one thing remains certain: any profits that you’ve locked in this year will be subject to taxation. Fortunately, there’s an easy way to anticipate how much you’ll owe: CoinTracking.info.
If you’re not already familiar with the crypto industry’s leading tax software, now is a great time to try it out. All the core features are accessible through CoinTracking Free. Anyone with more than 200 transactions can use one of CoinTracking’s paid plans to automate their taxes.
How does crypto taxation work?
Most countries’ tax authorities treat cryptocurrency as if it were property in most cases. In other words: if you only buy crypto, you don’t have any crypto tax obligations. However, that changes as soon as you sell. Every time you sell your crypto for a profit, you accumulate a capital gain. Likewise, selling for a loss results in a capital loss.
If you use your crypto to purchase something, the same principle applies. If the price of your coin goes up and you use it to buy something, you’ll owe taxes. Likewise, if prices fall, you’ll be able to write off a capital loss when you use your crypto to make a purchase.
The exact amount you’ll have to pay in crypto taxes at the end of the year will depend on a variety of factors. Most tax authorities will give you a tax break if you hold onto your crypto for a year or so before cashing out. In Germany, for example, individual long term crypto investors don’t have to pay any taxes whatsoever. In the United States, your long term capital gains rate could be as high as 20% or as low as 0%, depending on how much money you made during the year. CoinTracking’s Long & Short report gives you a quick look at where you stand.
How does CoinTracking work?
Gathering all the information you need to do your crypto taxes can be a hassle. That’s where CoinTracking comes in. It automates the data collection process and crunches all the numbers for you. Since it supports the cost basis accounting methods used in the United States, Germany, Canada, the UK, and many other countries, nearly anyone in the world can use it.
Simply put, CoinTracking processes your crypto transactions, collates the data and gives you the ability to create tax reports. Before CoinTracking came out in 2012, crypto traders were using spreadsheets to figure out how much they owed. CoinTracking eliminates that hassle.
Most exchanges give you an option to export CSV files of your transactions. You can either upload these CSV logs or connect your exchange accounts to CoinTracking so that all the data syncs automatically through API. Once connected through API, all your exchange accounts will sync to your CoinTracking account daily. It’s an excellent way for crypto traders that use several different exchanges to stay organized and aware of how their moves affect their taxes.
New benefits for premium CoinTracking subscribers
The latest addition to CoinTracking’s feature set is its new benefits page. The benefits page combines cryptocurrency projects from around the cryptoverse and gives its paid subscribers access to exclusive deals.
The Singapore-based exchange ByBit is offering $610 in non-withdrawable credit, which premium CoinTracking users can use to try to make withdrawable profits in crypto markets. The crypto online learning sites Sharper Trades and CryptoCandlez have partnered with CoinTracking to bring its users professional-quality educational content. You can even create your own custom crypto charts for free with Cryptosheets or dive deeper into analytics with a special three-month free trial of IntoTheBlock. Many other partners provide exclusive benefits for CoinTracking users, as well. Go to our site and check out the exclusive benefits page to see what offers are currently available.
Should I sell my Bitcoin to lock in profits now, wait until 2021, or HODL?
The answer depends on a variety of factors. From a tax perspective, it may make sense to sell before the year ends– especially if you anticipate that you’ll make more money next year than you did this year. Some people made less money in 2020 because of coronavirus-related economic slowdowns. That income reduction may allow you to enter into a lower capital gains tax bracket. Also, the 2017 pattern could repeat itself. Bitcoin spiked to dramatic all-time highs at the end of the year, only to quickly lose over half its value in the first part of 2018.
On the other hand, hanging onto your Bitcoin could also make a lot of sense. As mentioned earlier, some experts are saying that Bitcoin is poised to reach $170,000 and beyond in 2021. Despite Bitcoin’s many dramatic ups and downs, no other asset has outperformed Bitcoin since its 2009 debut.
Confused about which crypto tax strategy is right for you? Look no further than through CoinTracking’s in-house team of accountants for professional tax and legal advice. Visit our site and sign up for CoinTracking Full Service today to get expert help.