What’s an example of capital gain on a crypto-to-crypto transaction?
In addition, if you hold on to cryptocurrency from these activities and either spend or sell it later for more than the value when you first received it, you’ll owe short- or long-term capital gains taxes on the profits, based on how long you held the crypto. Is transferring crypto between wallets taxable You only pay taxes on your crypto when you realize a gain, which only occurs when you sell, use, or exchange it. Holding a cryptocurrency is not a taxable event.
How much tax do you pay on crypto gains
A8. Your basis (also known as your “cost basis”) is the amount you spent to acquire the virtual currency, including fees, commissions and other acquisition costs in U.S. dollars. Your adjusted basis is your basis increased by certain expenditures and decreased by certain deductions or credits in U.S. dollars. For more information on basis, see Publication 551, Basis of Assets. 2. Exchanging one cryptocurrency for another (capital gains) Cryptocurrency enthusiasts often exchange or trade one type of cryptocurrency for another. For example, say you have $1,000 worth of Litecoin and exchange it for $1,000 worth of Ethereum. If you originally paid $300 for the Litecoin, you have to recognize a $700 capital gain when you make the exchange. You established a $300 basis at the time of purchase for your original Litecoin position but recognized a $700 capital gain as a result of the coin’s appreciation between your purchase and the exchange for Ethereum. Your Ethereum’s basis is its fair market value at the time of exchange, making your new cost basis $1,000 after paying the $700 capital gain on the exchange.
Do You Pay Taxes on Crypto if You Reinvest?
\n Preview expires in 00:00\n In which jurisdictions must you file tax returns related to cryptocurrency? This website is using a security service to protect itself from online attacks. The action you just performed triggered the security solution. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data.