If you've invested in bitcoin or any other form of cryptocurrency, you need to understand how the irs taxes these type of investments and what is considered a taxable event because of the volatility of cryptocurrency tracking. Your capital gains can get pretty confusing. And if you accept or pay with crypto, it's even more important to understand how all these tax implications work. So in this video i'll be breaking down how cryptocurrency is taxed from transactions all the way to trading and how to handle all of it on your next tax return.

Now, before we begin, i am honored to have turbo tax reaching out and going ahead and sponsoring today's video. So just in the off case you didn't know, turbo tax is the number one best-selling tax preparation software to file taxes online. It's designed for all levels of investing and investment types from simple investing reporting to complex rental income and cryptocurrency plus more. You can easily file federal and state income tax returns with a hundred percent accuracy guaranteed, and it's how doing your taxes should be.

So to begin, do you have to pay taxes on cryptocurrency? What happens if you just ignore it? Well, it's only recently that cryptocurrency went ahead and gained tons of popularity. Newer investors may think that they could get away with not reporting any of these gains, but that might not be such a great idea by avoiding paying taxes on something like this. Even when we're very early on could result in you getting penalized with fines. That may be even greater than the gains that you're able to make within this market.

To answer the question brian, is this video even important? Do i need to even file my taxes with crypto? I would recommend you to do so, even if you think you get away with it, because eventually, a lot of these platforms are going gon na be moving over into software. That reports this and lets the government knows anyways, contrary to popular belief, although many people might refer to crypto as a virtual currency, the irs still doesn't yet accept that crypto is considered a currency at all. The irs actually considers cryptocurrency to be considered something called property. Therefore, any income you make in the sale of coins or tokens is still a taxable event.

Capital gains and losses need to be reported on your schedule, d tax form and, like other capital gains, your gain may be short-term or long-term. Depending on how long you hold on to the cryptocurrency before selling or exchanging it, to further show an example of this, if you ever owned a crypto, you bought for one year or less before, spending or selling it. That is considered short-term capital gain, which is taxed at your regular income rate. Think of it like this, the stock market.

You have investors who sometimes say: oh i'm not going to sell this stock because i don't want to get taxed at a short-term capital gain rate. That statement applies within the crypto markets too, and it gives investors another reason to also hold on to their investments. For just a bit longer, this really does hurt a lot of people who are more swing, trading or day trading on a consistent basis. And if you do have a consistent win ratio or if the market is about a tank.

And you have your own crystal ball and you know it's about to happen. Don't let the deterrent of taxes be a reason on why you don't sell your crypto simply put just because you're trying to avoid that short-term capital gain tax. It doesn't make sense in the long run if your entire investment still goes down now in contrary to short-term capital gain. If you've held on to the cryptocurrency for more than one year, it is considered long-term capital gain.

How you report cryptocurrency on your taxes, is gon na depend on how you got it and how you used it and how much you pay depends on the tax bracket. You fall under by the way you can use free tools like the turbotax cryptocurrency tax calculator, to help you start and get an estimate on your taxes on whether it's short-term or long-term capital gains, for example, if you're filing your taxes as an individual and your total Income, including your gains, is say, 50 000 you'd be paying 15 in taxes on long-term gains. Now, if you happen to sell your holdings in less than one year with the same income, you would be paying 22 in taxes instead. So, yes, you'd, be saving seven percent.

In taxes, just by holding for one year or longer now we may not talk about mining crypto much on this channel. But let's touch on that for the purpose of this video, because you want to make sure all your bases are covered. So if you didn't know, mining is just solving cryptographic equations to validate and add crypto transactions to a blockchain miners receive cryptocurrency in exchange for that work and if you mine any cryptocurrency any income you make from it is considered taxable income and might be reported on Form 1099 nec at the fair market value of the cryptocurrency. On the day you received it, just as if it were self-employment income.

Another form of taxable crypto is using cryptocurrency as payment for goods or services. Many businesses now accept bitcoin and other forms of cryptocurrency. So this means, if someone wants to pay you a cryptocurrency in exchange for goods or services, the payment counts as taxable income, just as if they pay you via cash or check. What this means is you'll be taxed on the dollar value that you received for goods or services equal to the fair market value of the cryptocurrency on the day you received it.

This is because there are many fluctuations with these currencies and if the value goes up by the time you sell or spend it, unfortunately, you would have to pay tax on those gains as well until the government recognizes crypto as a federal currency. This is just how it's gon na be if you sell or spend cryptocurrency you'll, have a transaction resulting in a gain or loss, just as you would, if you sold shares of a stock you'll want to keep track of the date, its value and the market price Of the cryptocurrencies, when you both received and spent them for proper tax accounting, this is where cryptocurrency taxes might get complicated. So this is the reason why we actually decided to work with turbo tax and they offer you an ability to maximize your insight and the tax outcome and even get one-on-one unlimited guidance with different tax experts that can help you with the process. So as another example, let's say you receive 300 worth of bitcoin in exchange for services on april 20th, seven weeks later, on june, 9th the fair market value of your bitcoin has increased to 450 dollars and you use it to buy plane tickets for a vacation on Your tax return for that year, you should report 300 of income for receiving the bitcoin in april and a short-term capital gain of 150.

If you're converting your bitcoin to cash right when you get paid, it should be listed on your tax report as regular cash income. Since there is no conversation, there are no capital gains. Those two situations may sound easy to track, but imagine you purchase a thousand dollars worth of bitcoin and load it onto a crypto debit card and spend it on gas, coffee and food. If you aren't keeping track of capital gains and losses for each one of those transactions, trust me it can get tough to deal with it at the end of the year.

So hopefully, with the further developments of exchanges, we know that this could be less complicated in the future. But last but not least, we do need to talk about another way that you can get tax and if you exchange one cryptocurrency for another, that is when a taxable event also occurs. So crypto traders can often trade one type of cryptocurrency for another. This is common knowledge.

People can mistakenly assume, though, that that is considered a purchase and therefore assume that it isn't a taxable event like buying bitcoin with us dollars, but that is actually not the case either. For example, say you have a thousand dollars worth of ethereum and exchange it for a thousand dollars worth of solana. If you originally paid 700 for the ethereum, you still have to recognize that 300 difference in capital gain when you make the exchange. You have to remember that crypto is not considered a real currency, like we mentioned earlier in this video by the us government, so they see it as trading one property for another.

Now the question is how about losses, if you find that you've incurred a loss in value of your crypto, this is where it gets really cool. This would be considered capital loss and it's equally as important to report your losses, because this offsets your taxable income as well. So that's another easy example say you bought some shares of gamestop stock and it increased in value by two hundred dollars. If it's taxed at fifteen percent, that's thirty dollars in a year, you also bought cardano.

In the same year that lost thirty dollars. You could write off that thirty dollar tax by filing the loss with your stock portfolio gains, you can actually write off up to three thousand dollars in capital losses if you're filing as an individual. Three thousand dollars is a lot and if you guys do see any ls on your portfolio make sure you do have yourself capitalizing on things like that, now it's essential to have an accurate and convenient way to file your taxes. So this actually leads me to tell you more about turbo tax.

Turbo tax allows you to do your taxes yourself with expert help, like we mentioned earlier in this video from start to finish, and it is really up to you if you're, self-employed or you're an investor like me, i know that our time is very valuable, so it's Essential that you have a trusted and reliable platform to make sure you file your taxes, and you do it accurately. Even from the comfort of your own home, you can access tax experts to coach you along the way, via one-way video call, chat or phone to get all your tax questions answered using turbotax live. Turbotax is designed for all levels of investing and investment types from simple investing reporting to complex rental income, cryptocurrency and, more all, with 100 accuracy, guaranteed to further simplify the tax filing process. You can also import up to 10 000 stock in 4 000 crypto transactions from hundreds of financial partners.

So whether you choose to file your taxes yourself or with the help of a live tax, expert turbo tax has you covered and to learn more visit? The link down below in the description and get started with the turbo tax today now to close this video out, it should be important for everyone to know, especially because the irs is increasing the amount of enforcement of reporting cryptocurrencies. The irs estimates that only a fraction of people were properly reporting their actual crypto tax returns so beginning in the year of 2020. The irs also made a change to form 1040 to include a question that asks if you ever received, sold or sent or exchanged or had any type of interest in cryptocurrency. And if you check yes, the irs will likely expect to see an income from crypto transactions.

On your tax return, so, ladies and gents, that was the video for today with regards to tax now i know a lot of this may not be the most entertaining. It may not be the most odd dropping it's not a passive income strategy. It's taxes! It's things that we hate doing. We don't like to even think about, but a lot of this content is so so important for you guys to know just so you don't get dinged in the future or you have a better idea on what to do.

As an investor, it is pretty rare for a company to this size to be reaching out to a channel like us, and sometimes it's just so odd, dropping that they even find us of any value. Nonetheless, i do appreciate turbotax for reaching out and sponsoring this video. Now that being said, if you guys did enjoy content like this, don't forget to like and don't forget to subscribe, if you guys are trying to learn a little bit more educational crypto content. Uh follow me over on twitter, if you guys have not done so already at brian jungie and don't forget to follow me on instagram credit brian listed down below in the description as well.

We also do have a private membership group and if you guys, are interested in learning more, we do have some seminars in there. Some live streams and we have a well-lit community where you can learn more and get some access to my trades and what my portfolio looks like some of the holdings i have and in general, have a bit more access to myself as a creator as well. Now, with all that being said, thank you all so much guys for watching today's video have an amazing day and i'll talk to y'all soon, peace.