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How to calculate tax on crypto currencies

Personal Finance & Money Asked on June 8, 2021

Suppose I buy some bitcoin for $100. Some time later, it is worth $200. I sell half of it for $100. Do I have to pay tax?

On one hand, "on paper" I gained $50, since the half that I sold was worth $50 when I bought it.

On the other hand, if tomorrow (or in 10 years) the bitcoin price goes to 0, my net gain will be 0.

How exactly should I compute the tax such that I do not end up paying tax for a net gain of 0?

One Answer

Your cost basis is $100; if you sell half of your holdings for $100, your cost basis on that is $50 and thus you had a $50 profit on which you owe taxes.

If, in the future your asset becomes worthless and you dispose of it for $0, you have a separate loss of $50 that you can deduct from your taxes at that time.

But for now, you don't get to use imaginary losses to avoid paying taxes on real profits.

Answered by Shawaron on June 8, 2021

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