Without a doubt, politicians are still at the early stages of understanding cryptocurrency and thus, it’s still blurry what proper regulations or tax laws to implement on it. The IRS or the Internal Revenue Service has released guidance on these virtual currencies among taxpayers back in 2014.
Since then, there’s no other guidance or legislation was proposed.
The Basics
In this article, we are going to take a look at how lawmakers study the structure of cryptocurrency and at the same time, outline the integral elements needed to be mindful about.
Well first, cryptocurrency is deemed much like any other assets. Meaning to say, capital gains tax rules are applicable to it as well. This is regardless if you have gained or not. Being able to calculate losses and gains are basically the same as if you’re selling and buying stocks. The same thing is applicable in relation to holding period, cost basis as well as triggering event.
What about those who are 100% Clueless?
Don’t think that you’re a fool for not knowing any of this. There are many others who are in the same shoes as yours and don’t know anything about tax laws or fundamentals, which make everything so confusing. In this regards, we’ll dive to the more complex pieces of information.
Your Capital Gains
If it is for a tax purpose, first thing to be done is to calculate capital losses and gains. This can be done by finding out how much percentage your cost basis shoots up or down. This is from the time you’ve obtained the asset from the time when there’s a taxable event. Simply speaking, your capital gains are equivalent to current fair market value of cryptocurrency minus the cost basis.
Capital Loss/Gain = Fair Market Value – Cost Basis
Cost basis is simply the amount you pay for the asset. Meaning, cost basis for whatever cryptocurrency you are using is the sum of money that you use to buy it. This cost is basically the fees that you’ve paid to have the crypto from VIPsignals signals. It normally includes:
- Exchange fees and;
- Brokerage fees