According to data from Santiment, traders are looking towards words around taxes on social media platforms. The fast growth in cryptos has seen an influx of new cryptocurrency investors and traders, attracting significant attention from HMRC and many tax authorities worldwide. Consequently, these regulatory bodies are actively enquiring into crypto businesses and investments to make sure they pay their fair share.
Crypto Traders Have ‘Taxes’ on their Minds
Capital gains tax rules apply to cryptocurrencies such as Bitcoin and Ethereum. The tax authorities treat all cryptocurrencies like crypto assets, and you are obliged to pay taxes if you sell them at a profit. Also, just like when you sell an investment at a loss, you can claim a capital loss if the cryptos have declined in value.
However, these crypto taxes also come with inevitable additional wrinkles. One is also liable to pay crypto taxes when you mine crypto and use cryptos to pay for goods or services.
Other taxable events include crypto-fiat trades, crypto to crypto trades, income earned in crypto. However, simply purchasing and holding crypto in a wallet is not taxable. Additionally, transferring cryptocurrency from one wallet to another that is yours is not taxable.
If you believe that crypto is anonymous and therefore not subject to taxation, you should secondly consider it. Unpaid taxes often accrue interests and attract penalties each day they are unpaid. Moreover, the IRS pursues unpaid tax amounts through liens on private property, seizure of property, garnishment of wages, and more.
Any investor tempted to evade tax ought to beware of the tax man’s growing reach. However, as 2021 comes to a close, some trending hashtags show that crypto traders are ready and willing to comply with these tax regulations.
There are certain ways investors can reduce their tax obligations to preserve wealth. For instance, one can go with tax-loss harvesting. This involves selling crypto assets at a loss to offset any tax liabilities associated with capital gains.
Additionally, long-term capital gains offer significantly lower taxes than short-term gains. If you can hold your cryptos for a period longer than a year, it may reduce your tax burden.
Elon Musk Could Pay Over $11 Million in Taxes
Elon Musk is set to pay the biggest tax bill in U.S History in the coming tax season, amounting to over $11 billion for 2021. These taxes were incurred by exercising stock options and result from capital gains taxation. His net worth currently stands at $243 billion, and he has accumulated over $87 billion in 2021.
As enterprise and institutional adoption in crypto continue to increase, crypto regulations are getting tighter. A strong crypto taxation strategy is also there, and regardless of whether people think it’s a good or bad thing, the majority are starting to accept and comply with these rules.
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