2021 was a huge year for cryptocurrencies. Statistics suggest that over 105 million people use cryptocurrencies globally and the number of investors is increasing year on year. Buying cryptocurrency offers opportunities to make money, but what about paying tax? Are cryptocurrencies taxable?
Do you have to pay taxes on crypto?
Investing is not always as straightforward as buying and selling entities. As well as market movements and factors that impact value, investors also have to be aware of other limitations that could reduce profits, including paying taxes. Buying crypto has become incredibly popular in the last few years. There are opportunities to make money when prices rise, but it’s crucial for investors and aspiring investors to understand tax liabilities. People who buy cryptocurrencies like Ethereum and Bitcoin will pay tax on them. In the US, for example, the IRS views cryptocurrencies as taxable assets in the same way as stocks and precious metals.
Understanding tax liabilities
If you plan to buy cryptocurrencies, it’s essential to consider how paying tax on your investment will impact you financially. For new investors, the next tax deadline will be the first time they pay taxes on crypto. Preparing for the hit enables investors to plan and make sure they have sufficient funds to cover their tax bill. Calculating taxes can also help investors to figure out what is affordable in terms of how much they want to invest initially and whether it’s wise to expand their portfolio. For those who are not familiar with paying tax on cryptocurrencies, seeking expert advice can help to simplify the process and reduce the risk of mistakes and fines.
If you are thinking about investing in 2022, it’s important to understand that you will pay taxes on crypto. Understanding tax liabilities can help you plan ahead and organize your finances.