Tips to claim tax losses with the US Internal Revenue Service
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With the market falling off a cliff, there will be big losses to claim on your taxes, right? Well, let’s break it down in detail.
Crypto volatility is nerve-wracking, and it may not be over yet. The turmoil may make crypto investors and crypto-related businesses less enthusiastic than when prices seemed ever to be climbing. With the market falling off a cliff, there will be big losses to claim on your taxes, right? Not necessarily. As your United States dollars shake out in the digital world, it is worth asking whether there is any lemonade you can make by claiming losses on your taxes.
First, ask what happened from a tax viewpoint. If you’ve been trading and triggering big taxable gains, but then the floor drops out, first consider whether you can pay your taxes for the gains you have already triggered this year. Taxes are annual and generally based on a calendar year unless you have properly elected otherwise. Start with the proposition that each time you sell or exchange a cryptocurrency for cash, another cryptocurrency, or for goods or services, the transaction is considered a taxable event.
That is a result of the U.S. Internal Revenue Service’s shot heard ‘round the world in Notice 2014-21 when the IRS announced that crypto is property for tax purposes. Not currency, not securities, but property, so most any transaction means the IRS wants you to report gain or loss.
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