There was a time when cryptocurrencies were so “cryptic” that very few people had the courage to venture into it.
However, he is becoming more of a household name now!
Although, no matter how popular the cryptocurrency is, there will be elements and updates that we may not experience. Thus, it is useful to always update yourself with the upcoming news.
It helps us better navigate the market, navigate its volatility, understand the market, while taking calculated risks.
First of all, you cannot enter the world of digital currency without taking a risk.
Therefore, be prepared!
Also, gather as much personal knowledge and research as possible.
One of the common questions that hits all of our cryptocurrency interest counters is the question of taxation?
– Is there a tax on cryptocurrency?
– How do taxes on crypto-currencies work?
Here is a beginner’s guide for you to understand everything.
Get started in cryptocurrency
If you are just starting your cryptocurrency journey, then understanding taxes is a valid concern.
If you’re confident enough to get started, start by creating an account in bitqs, then get started.
This is one of the best areas for beginners to dive into the world of cryptocurrency.
Is there a tax on cryptocurrency?
Now, back on topic, here is the answer to the million dollar question.
In short, yes, cryptocurrencies have taxes.
It is the same as the stock market. Any profit from the sale of cryptocurrency must be declared to the tax levied by the country.
On the other hand, if you have Bitcoin in the form of “Staking”, there is no income with this Cryptocurrency. Thus, there is no tax acquired from them.
Staking involves freezing your cryptocurrency for a minimum amount of time, especially when the weather is extremely volatile. This is when the asset stagnates and generates neither profit nor loss.
How Cryptocurrency Taxes Work
There may be problems understanding the different jargons for a beginner. So, here is a simple description of how taxes work.
First of all, this is a recent change in the cryptocurrency world. Digital coins like Bitcoin and Etherium are among the few to be taxed this year. The tax method will be the same as for other assets like stocks or gold.
This, however, only implies if the asset has acquired a profit before the tax season.
1. When you buy only
Taxation is at the end of each year. So let’s say last year you just bought a cryptocurrency or just a part of it with your fiat currency (US dollars). If this is your only activity throughout the year, taxes do not apply to you.
Since you haven’t traded anything or even made a transaction for the whole year, you don’t owe any taxes to the government. This is in line with the new law, which has changes regarding the taxation of cryptocurrencies.
2. Not all cryptocurrencies are taxable
Not all cryptocurrencies are taxable; only some of the pioneers obtained this imposition. This was imposed in the first place to control the various criminal activities that were experiencing an upsurge in the crypto world.
So, if you are considering entering the world of cryptocurrency, remember that if it is Bitcoin, every profit you make is taxable. Portugal is the only country that does not have a tax on the legal use of cryptocurrency.
3. The taxation acquired on the profit depends on the size of the family
Yes, you saw correctly; When it comes to cryptocurrency, there are different ways you owe the tax.
For example, if you are a single person and trade in cryptocurrency, the tax you owe will be different than who is the head of household and has dependents.
Is it worth it?
There have been mixed feelings about taxation, as many investors have loved the tax-free formula for cryptocurrency.
However, the more mainstream digital currency became in the economy, the more this was bound to happen.
Moreover, this tax contributes to regulation and tax evasion is difficult because of the blockchain system.