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> no issues with tax&bank issues Sure about that bit? This may be the perception – that holding your assets in 'the crypto system' avoids tax issues – but the
by jen729w 4y ago
> no issues with tax&bank issues
Sure about that bit? This may be the perception – that holding your assets in 'the crypto system' avoids tax issues – but the taxman will disagree.
Swapping $BTC for $USDC or whatever your tether of choice is is a 'taxable event'. You've sold one security in exchange for another. It doesn't matter that they're both crypto.
Now, it might be harder for the taxman to detect this event, which is a different thing.
- krzyk 4y agoYou mean taxable for US tax office? In my country it is not taxable, only exchange to fiat currency is. (and this is explicitly mentioned).
- lottin 4y agoIf this is true, it simply means your tax code has a giant loophole that allows people avoid paying tax on capital gains by simply swapping an asset for another.
- adnzzzzZ 4y agoYou still have to pay taxes when you convert back to fiat though. And eventually you have to do this because you don't want a significant portion of your wealth in stablecoins that might collapse overnight.
- sokoloff 4y agoSort of like a 1031 exchange in the US: https://en.m.wikipedia.org/wiki/Internal_Revenue_Code_section_1031 https://en.m.wikipedia.org/wiki/Internal_Revenue_Code_sectio...
- krzyk 4y agoWhy? You eventually have to pay it when you cash out (or buy service, goods with crypto). If you wait you loose tax returns for the amount you invested in crypto (with each year you have it halved). Basically this is the same as in case of stock market. You don't pay taxes until you sell stock. And here stock is whole crypto market.
- lottin 4y agoI buy 100 USDC. I use these to buy some crypto-currency. 6 months later, I sell the crypto-currency for USDC, making a 10% profit. I sell the USDC for USD. Notice that I have made no profit from the sale of USDC, which is (supposedly) the only taxable event in this series of transactions. I bought 110 USDC worth $1 each, and sold 110 USDC worth $1 each. And I don't even have to sell the USDC for USD, I can buy stuff directly with USDC.
- maccard 4y agoThat's not how capital gains works. > I use these to buy some crypto-currency. 6 months later, I sell the crypto-currency for USDC, making a 10% profit. I In every tax jurisdiction I know of in the world, this is a taxable transaction.
- lottin 4y agoOf course, it is, but they are arguing that it's not a taxable event, in some jurisdictions.
- namdnay 4y agoDepends on the jurisdiction. In most European countries for example, you only pay tax when cashing out
- logifail 4y ago> when cashing out Cashing out meaning "selling crypto for fiat"? What about if you sell BTC for another crypto or for gold or ...
- lottin 4y agoIt means selling the asset, full stop.
- logifail 4y ago> It means selling the asset, full stop So it seems from the outside that stablecoins exist primarily to take advantage of grey areas in taxation legislation - and possibly also KYC/AML legislation - which allow investors in certain jurisdictions to avoid taxable events which would otherwise occur when trading. Building a business model on dodging taxes isn't a great look, is it?
- folmar 4y agoWe also have umbrella investment funds doing the same thing but without crypto.
- deadbunny 4y agoIn the UK swapping between crypto is a taxable event.
- mjul 4y agoNote that “cashing out” in some EU countries means transacting your cryptocurrency tokens in any way, not just trading them for money. Example: Sweden taxes your gains when you transact a cryptocurrency holding, also when you exchange from one cryptocurrency to another. [1] Same for Denmark [2]. Check your relevant tax legislation for your local rules. [1] https://skatteverket.se/privat/skatter/vardepapper/andratillgangar/kryptovalutor.4.15532c7b1442f256bae11b60.html https://skatteverket.se/privat/skatter/vardepapper/andratill... [2] https://skat.dk/skat.aspx?oid=8953 https://skat.dk/skat.aspx?oid=8953
- uwuemu 4y agoThat makes no sense. You pay taxes on realized gains (i.e. when you cash out), not unrealized ones... otherwise people like Elon Musk would have to pay tens of billions of dollars in taxes and sell off part of their stock to even be able to pay the tax (and probably ruin the company in the process). The same applies to crypto, and even though it's mostly not needed (you pay tax on realized gains in most countries and it makes common sense crypto would be similar), some countries alredy explicitly codified this, just to be crystal clear: You pay your taxes when you convert back to cash. That's the "taxable event". Same as when you sell your stock.
- mellavora 4y agoPlease check your local regulations on this. What Uwuemu says makes sense, but tax law does not have to make sense. I might be wrong, but I believe the IRS views every transaction as a taxable event. Crypto -> crypto included.
- somebodythere 4y agoYou are right. When you trade crypto->crypto, the IRS views it as if you traded crypto->USD then USD->crypto.
- uwuemu 4y agoso when you buy 1 btc for $30k, trade the btc for 100 of bscoin, bscoin rises to 50 bscoin pet 1 btc, you change back to btc, now you have 2 btc, but the next day big crash occurs and 1 btc is worth just 10k... you cash out and there you have it, a $10k loss... but, you're supposed to pay the tax man on the bscoin -> btc trade? That makes no sense. And then what, you'll want that tax back because of the loss? More BS paperwork for no reason? And all this for what?
- somebodythere 4y agoThat's correct, but under US tax law, in certain cases you are able to realize the loss on the BTC to offset the gains you made earlier (tax-loss harvesting)
- jen729w 4y agoSorry all, should have been specific: Australia. https://www.ato.gov.au/General/Other-languages/In-detail/Information-in-other-languages/Cryptocurrency-and-tax/ https://www.ato.gov.au/General/Other-languages/In-detail/Inf... But be careful! Actually read what your local tax office puts out. Assume nothing: it can be very easy to get yourself in to trouble. For example: - You buy BTC @ $1 - You exchange BTC @ $11 for $RANDOM - You just made $10 :-) and you owe the taxman ~$3 (if you're in Australia) - $RANDOM falls to ~$0 - So you didn't actually make a material profit - But you still owe the taxman $3! (though you might be able to claim some sort of offset on your material loss of $RANDOM; IANAA) - Now multiply all amounts by 10,000 and be sad It's analogous to selling any asset. You buy gold, you sell gold at a profit and buy silver. You owe tax on the sale of the gold; you assume you'll pay this from the value you now hold in silver. The price of silver plummets. You still owe the tax on the sale of the gold.
- xuki 4y agoYou can deduct capital loss from capital gain, unless it occurs in the next financial year then you get to carry it forward indefinitely.
- s-lambert 4y ago>- But you still owe the taxman $3! (though you might be able to claim some sort of offset on your material loss of $RANDOM; IANAA) From what I understand, you have to actually realize your losses/gains if you want to claim tax on them. So if $RANDOM drops to ~$0 then you can't use it for capital losses until you trade it to another crypto (or cash). You could probably just trade $RANDOM to something else and then back to realize the losses.
- Grimburger 4y agoYou handwave away $RANDOM falling to zero as something which doesn't count as a capital loss that you can carry forward to offset all future gains? As another Australian you should really speak to an accountant if you ain't going to claim that massive loss because this is either comically wrong or intentionally misleading advice. It's just like any other capital gains event and very simple to grok.