Cryptocurrency sales

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Did you purchase an item using virtual currency? Are you selling virtual currency like Bitcoin? Buying or selling cryptocurrency Most states are still attempting to catch up to the virtual world and how sales tax should be handled on the purchases of digital items.

When most sales tax laws were written, regulators were focused on tangible goods, not digital offerings like SaaS or cryptocurrency. Some states have determined that purchases of cryptocurrency are not subject to sales tax, while some have sales tax laws that allow for the taxation of intangible goods, including cryptocurrency. The majority of states have not yet released cryptocurrency-specific sales tax guidance. Is the amount of sales tax you charge dependent on the price of the book, or the current value of Bitcoin in dollars at the time of purchase?

Since these are often two different numbers, how does a retailer know which to use to calculate sales tax? In some states, including New York, the retailer would calculate the sales tax rate based on the fair market value of the cryptocurrency in dollars at the time of the sale. For companies in New York that accept cryptocurrency payments, this would mean they need to maintain accurate records of the digital currency value at the purchase time for sales tax reporting purposes.

Schedule D. This form summarizes your total capital gains and capital losses from all investments, including crypto. Schedule C. If you received coins from mining, you need to disclose whether you received them as a business or as a hobby. Schedule 1. File Your Taxes If you keep records in software like Koinly or CoinTracker, you can connect them with your online tax software of choice. Then use the online tax software to file your overall state and federal tax returns.

For those looking for one-stop services, TokenTax provides a full suite of accounting services to track and prepare both your crypto and regular taxes. Compare the best tax software of See our picks 4. Hire a Professional Preparing for cryptocurrency taxes can be complicated, especially since the laws surrounding them are constantly evolving. How to Minimize Crypto Taxes If you think you might owe cryptocurrency taxes in the future, here are six ways to help minimize them: 1.

Hold Cryptocurrency for the Long-Term If you hold a crypto investment for at least one year before selling, your gains qualify for the preferential long-term capital gains rate. Offset Gains with Losses As with any investment, you can take advantage of crypto gains by also claiming losses on other investments the year you realize your profit. If you are about to cash in a large crypto investment, look through the rest of your portfolio to see if there are other losing investments you could sell to offset your gains.

Claim Expenses for Mining While it might seem like a low-cost activity in theory, mining crypto comes with considerable expenses, including computers, servers, electricity and internet service provider charges.