Do I Need A Tax Advisor For Bitcoin

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In The United States

A great question.

I mean, if you haven’t sold any of your stack yet, and probably haven’t incurred a taxable transaction, then why would you need to consult a professional tax advisor? You’re a HODLer; you have diamond hands. You’ll never sell. So, do you need to involve a tax pro?

Short answer: Yes. Mainly because you don’t know what you don’t know.

Purchasing, or receiving, Bitcoin has tax implications. Most everyone who buys Bitcoin dreams of selling it someday for a huge stack of fiat dollars. That’s right, converting it back to fiat, even if it’s just to diversify the portfolio. And in that case, you’ll need to have good records at your disposal. Records of your cost basis, in order to compute your capital gains.

Here are four potential situations that will make you happy you consulted that tax professional early on:

  • You’re earning interest yield on your Bitcoin. Most crypto exchanges offer an option to earn yield on your bitcoin, at rates ranging from 1% to 12%. The exchanges will pay your interest yield in bitcoin, not in fiat currency, so does that constitute taxable income? Yep. You need to claim that on your tax return when you earn the yield. Exchanges also offer rewards and token drops, and these are taxable immediately as well.



Source link Bitcoin Magazine

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