Cryptocurrency Tax Considerations: What to Know About Bitcoin Tax

Cryptocurrency Tax Considerations: What to Know About Bitcoin Tax


Have you recently acquired, exchanged or sold a financial interest in virtual currency, be it bitcoin or some other digital token? If so, lawmakers and tax agencies in the U.S., U.K., Denmark, Brazil and other countries want you to know this: faithful records must be maintained in order to calculate your tax liability at the end of the financial year. No excuses. 

Earlier this year, both the Internal Revenue Service (IRS) and Her Majesty’s Revenue and Customs (HMRC) sought to drive home this message, dispatching letters to taxpayers suspected of tax evasion as well as pressuring major exchanges such as Coinbase and to reveal customers’ names and transaction histories. As well as petitioning individuals and exchanges, tax investigators have been known to comb social media platforms, search for incriminating blogs and review forum conversations to hold crypto holders to account. Never before has there been such a concerted, committed effort on the part of tax agencies to gather information about citizens’ digital currency holdings.

Cryptocurrency Tax Basics

Needless to say, each country’s treatment of cryptocurrency taxation differs – often significantly. Indeed, there are several bitcoin-friendly nations which do not tax crypto-holding individuals at all, including Singapore and Portugal. However one wonders whether processes will be tightened in the coming years, as governments start to comprehend the revenue they might conceivably receive by enacting stringent cryptocurrency legislation.

While it is worth pondering the official guidance if you have conducted transactions in recent years, there are some broad principles you should be aware of. Firstly, if you have sold cryptocurrency – whether via an official exchange or in person – you must make a record of the transaction. If such an event resulted in a capital gain, it is necessary to pay the appropriate tax. This holds true for many of the countries which are now vocally seeking to enforce robust crypto tax compliance. Failure to obey these mandates is likely to provoke a stiff penalty, proportionate to the size of the capital gain. Penalties could also be enforced if the information you supply is inaccurate or incomplete.

Incidentally, individuals who have suffered a capital loss are entitled to a tax deduction: the important thing is to observe the reporting process, the same way you would if you transacted stocks and securities. Needless to say, it can get pretty complicated – which is why it’s worth investing in bitcoin tax software to aggregate transactions, track cost basis and calculate your liability from month to month.

While cryptocurrencies such as bitcoin and ether are often treated as investment assets, an increasing number of people – particularly employees and independent contractors working in the cryptoconomy – receive payment for labor not in fiat but in crypto. It should come as no surprise that such earnings entail tax obligations, specifically income tax. And if you cash out your wages at a later date, after the price jumps, you’re on the hook for the aforementioned capital gains. Again, crypto-specific accounting software can simplify the process to a large degree.

Cryptocurrency Tax Laws Are Still Evolving


Although governments around the world are getting to grips with cryptocurrency, it’s fair to say clearer crypto tax laws are likely to be rolled out in the years ahead. This was perfectly illustrated by the head-scratching of U.S. Congress members who recently petitioned the IRS to supply additional clarity on cryptocurrency tax laws, noting that “recent guidance creates many new questions related to the topics it seeks to address, namely forks and airdrops.”

Some commentators also believe bitcoin tax laws should include a de minimus exception, whereby crypto owners become immune to tax on transactions below a specified threshold. Others contend that crypto-to-crypto exchanges should be covered by like-kind exchange tax exemptions, which allow for the disposal of an asset and the acquisition of another without triggering a tax liability.

Whether or not such amendments come to pass, we can say with confidence that the resources and tools governments wield to identify crypto transactions, and consequently collect the applicable taxes, are likely to improve in the short and long term – and will do so at a quicker rate as crypto transactions become more valuable.


*** SPECIAL ALERT — June 27, 2020 — THREE of this Year’s Motley Fool Stock Picks Have Already Doubled! ****

We have been tracking ALL of the Motley Fool stock picks since January 2016. That’s 4+ years, 54 months and 108 stock picks. As of Friday, June 26th 3 of their 12 2020 stocks picks have already doubled (TSLA, ZM, SHOP). In addition, 4 of their 2019, 8 of their 2018, 7 of their 2016 and 10 of their 2016 picks have also doubled. Best of all, over these 54 months, the average stock pick is up 111%. That beats the SP500 by an average of 87%. And that’s even accounting for all of this COVID mess that has wreaked havoc on some stocks but presented opportunity for other stocks. THAT is how the Fool does so well!

  • Shopify (SHOP) – April 2, 2020 pick and it is already up 163%
  • Zoom Video (ZM) – March 19, 2020 pick and it is already up 107%
  • DexCom (DXCM) picked Feb 20, 2020 right before the market crashed and it is still up 26%
  • Tesla (TSLA) picked January 2, 2020 before the crash and it is up 123% compared to the SP500 -7% so it is ahead of the market by 130%
  • HubSpot (HUBS) picked December 5, 2019 and it is up 46%
  • Netflix (NFLX) picked November 21, 2019 and it is up 42%
  • Trade Desk (TTD) picked November 11, 2019 and up 111%
  • Zoom Video originally picked Oct 3 and it is up 234%
  • SolarEdge (SEDG) picked September 19, 2019 and it is up 44%

Now, no one can guarantee that their next picks will be as strong, but our 4.5 years of experience has been super-profitable. They also claim that since inception, their average pick is up 424% and now we believe them. You sure don’t want to risk missing out. Many analysts are saying that we have passed the bottom of this COVID crisis and stocks will recover quickly. So make sure you have the best stocks in your portfolio.

Normally the Fool service is priced at $199 per year but they are currently offering it for just $99/year if you click this link

CLICK HERE to get The Motley Fool’s Stock Picks for just $99 per Year! 



Robinhood was the first brokerage site to NOT charge commissions when they opened in 2013. They just past 10,000,000 accounts and to celebrate they are offering up to $1,000 in free stock when you open a new account.

Here’s the details: You must click on a special promo link to open your new Robinhood account. Then when you fund your account with at least $10, you will receive one stock valued between $5 and $500. Then, you will get a link to share with your friends. Every time one of your friends opens an account, you will receive another free stock valued between $5 and $500. Click here to learn more about this Special Robinhood offer.

Claim your free stock NOW

(before it’s too late)

Leave a Reply

Your email address will not be published. Required fields are marked *