Do we need to pay taxes while selling our Crypto?

If you deal with bitcoin or any other cryptocurrency frequently, there’s a good possibility you sell it for fiat money rather frequently. For your tax return, you need to be aware of the tax ramifications of selling cryptocurrency.

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One of the most frequent transactions you’ll likely do as a crypto investor is trading cryptocurrency for fiat money, whether that’s USD, GBP, AUD, or CAD.

You must be aware of the tax repercussions of selling cryptocurrency, including whether you must pay tax and, if so, what type of tax. This is because tax authorities all around the world, including the IRS and the ATO, have taken a hard stance on crypto taxation.

Fortunately, everything is fairly simple.

Are cryptocurrency sales taxed?

You must pay tax if you exchange cryptocurrency for any fiat currency. No matter where you are in the world, practically all tax authorities have adopted the same position on this.

It all comes down to how tax authorities see cryptocurrencies. Cryptocurrency is not considered a currency, despite the term. Rather, it is viewed as an asset, similar to a share or a rental property.

Therefore, from a tax viewpoint, selling cryptocurrency for fiat money is considered to be disposing of an asset. Selling your asset results in a gain or loss for you.

What is the cryptocurrency sales tax?

It doesn’t matter if you’re selling Bitcoin or Ether because they are both viewed as assets and are treated the same way. Capital Gains Tax is applicable to everything.

As was already stated, you will either make a profit or a loss when you sell your digital asset. Because it is taxed, this is often referred to as a capital gain or loss.

When you exchange your cryptocurrency for fiat, you may experience a capital gain, in which case your profit will be taxed. This is calculated by deducting your cost basis from the sale price of the asset. Your cost basis is the initial cost of the item plus any fees. Only the difference will be subject to tax.

Depending on where you live, how much regular income you earn, and how long you’ve owned the item, you may or may not have to pay taxes on capital gains.

When you exchange your cryptocurrency for money with the help of any tax software for crypto, you won’t be taxed if you make a capital loss. However, many nations allow you to offset your capital losses against your capital gains. This enables you to pay less in taxes.

Are there taxes imposed on the exchange of one cryptocurrency for another?

You now know that you must pay tax when you sell cryptocurrency, but what about when you exchange one cryptocurrency for another?

This is still seen as the disposal of an asset in the majority of nations. You will either have a gain or a loss, and as such, capital gains tax will apply. To this rule, there are some exceptions. For instance, France exclusively levies taxes on cryptocurrency sales made for fiat money, not sales made for any other cryptocurrencies.

Despite this, there are still additional cryptocurrency transactions that the majority of nations consider to be a disposition and hence liable to capital gains tax. Disposals comprise:

·   Converting your cryptocurrency into fiat money.

·   Trading one cryptocurrency for another.

·   Using cryptocurrency to purchase goods or services.

·   Gifting away your bitcoin (in many countries)

BINOCS is a crypto portfolio tracking software, that helps in the management of taxes and portfolio with a great ease. 

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