The IRS treats cryptocurrencies or virtual currencies as capital assets. So, any transactions concerning cryptocurrencies are subject to short-term or long-term capital gain tax.
Cryptocurrency tax facts:
For federal tax purposes, cryptocurrencies are seen as ‘Property’ and the IRS treats them as a capital asset.
Any transactions concerning cryptocurrencies are governed by the same tax principles applied to “Property” as per the IRS Publication 544, Sales and Other Dispositions of Assets.
When it comes to cashing out cryptocurrency for fiat money, one will need to know the base price of the Bitcoin they’re selling.
If you sell your assets before one year of purchase then short-term capital gain tax applies to the profit.
If you sell your assets after one year of purchase then long-term capital gain tax applies to the profit.
Transactions made with cryptocurrencies expose investors to taxes. These transactions include:
Crypto sold in profit is subject to tax.
Crypto sold in exchange for profit is subject to taxation.
Crypto sold in loss is also subject to tax.
Filing cryptocurrency taxes may seem like a daunting task but with the help of apps like FlyFin, you can calculate your cryptocurrency taxes with ease. Calculate your Cryto tax accurately- https://flyfin.tax/crypto-tax-calculator