What To Know About Taxes On Capital Gains For Crypto Holders

What To Know About Taxes On Capital Gains For Crypto Holders

Historically, one of the hallmarks of cryptocurrency has been its anonymity. But in 2020, both the FBI and IRS increased their efforts to ensure crypto users aren't breaking the law – or avoiding their tax bill. After all, where investors see profits, Uncle Sam sees tax potential. Unfortunately, crypto's trademark anonymity and trailblazing technology make it more difficult to use. Though it's designed as a currency, the IRS treats it like a security, injecting more murkiness into an already-intricate situation. Still, its complexity doesn't excuse you from paying taxes. And as the IRS decides how taxes work for investors (and how to make an example of tax dodgers), you don't want to get caught in the crosshairs. Here's what you need to know about cryptocurrency and your tax bill. In the United States, the IRS defines virtual currencies as property. For tax purposes, this relegates them to "capital assets" on par with stocks, bonds and even real estate. As such, crypto users must pay taxes on their gains, even if your broker doesn't report transactions to the IRS. Conversely, you can claim crypto losses against other investments or ordinary income. However, because they're regulated like an investment and spent like