Crypto-Assets: Be Aware of The Tax Trap with Capital Gains

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The Guardian just recently published an interesting article about the tax issue related to trading of cryptographic tokens and coins. The U.S. tax authority Internal Revenue Service (IRS) made clear that anything purchased using a cryptocurrency is liable to be taxed as a capital gain. So anyone who has cashed out or paid for anything using cryptocurrency may have capital gains to report to the IRS.

If you, for example, sold a Bitcoin to purchase another cryptocurrency such as Ether or Litecoin you may have realized a capital gain if you purchased this Bitcoin at a lower price. Hence, the hefty fluctuations of the exchange rates of crytpocurrencies have exposed investors and traders to huge tax bills.

The tax situation is different from jurisdiction to jurisdiction. Cryptocurrency investors in countries that do not tax capital gains – UK, Switzerland, Malta, Singapore, Monaco, etc. – don’t have to worry about that tax trap. Investors living in tax regimes that tax capital gains such as U.S., Germany, France, and most of the EU member states should be very aware of this tax trap.

Investors that sold parts cryptocurrencies with huge gains at last years peak my be left in a situation where the value of cryptocurrencies they still hold may well be low their tax bill.

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