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How Do Taxes On Cryptocurrencies Work: A Beginners Guide Shutterstock

How Do Taxes On Cryptocurrencies Work: A Beginners Guide

Written by  The Dubrovnik Times Feb 02, 2022

There was a time when Cryptocurrencies were so ‘cryptic’ that very few people had the courage to venture into this field.


 

However, it is becoming more of a household name now!


 

Although, no matter how mainstream Cryptocurrency gets, there will be elements and updates which we might not know. Thus, it helps to always update yourself with the upcoming news.


 

This helps us to navigate the market better, navigate its volatility, understand the market, all the while stepping with calculated risks.


 

First and foremost, you cannot penetrate the world of digital currency without taking a risk.


 

Hence, be prepared!


 

Plus, gather as much knowledge and personal research as you can.


 

One of the common questions which strike all of our interest meters when it comes to Cryptocurrency is the matter of tax?


 

- Is there any tax on Cryptocurrency?

- How do taxes on Cryptocurrency work?


 

Here is a beginner's guide for you to understand everything.

Starting In Cryptocurrency

If you are just starting your journey in the Cryptocurrency world, then understanding the taxes is a valid concern.


 

If you are confident enough to commence, then start by creating an account in bitqs and then get going.


 

This is one of the best domains for beginners to dip their toe in the world of Cryptocurrency.

Is There Any Tax In Cryptocurrency?

Now, coming back to the topic, here is the answer to the million-dollar question.


 

In short, yes, Cryptocurrencies do have taxes.


 

It is the same as the stock exchange. Any profit from the sale of Cryptocurrency has to be declared to the tax earned by the country.


 

On the other hand, if you have Bitcoin in the form of ‘Staking,’ then there is no income with that Cryptocurrency. Thus, there is no taxation acquired from them.


 

Staking is when you freeze your Cryptocurrency for a minimum time being, especially when the time is extremely volatile. This is when the asset is stagnant and has no profit or loss.

How Do Taxes On Cryptocurrencies Work

There might be some issues with understanding the different lingos for a beginner. Thus, here is a simple description of how the taxes work.


 

First of all, this is a recent change in the Cryptocurrency world. Digital coins like Bitcoin and Etherium are among the few getting taxable this year. The tax method will be the same as other assets like stocks or gold.


 

This, however, only entails if the asset has acquired any profit before the tax season.

1. When You Only Purchase

The taxation is at the end of each year. So let's say, last year, you just bought one Cryptocurrency or just a part with your fiat money (US dollars). If this is your only activity throughout the year, then taxations don’t apply to you.


 

Since you haven’t traded anything or even had a transaction for the entire year, you do not owe the government any tax. This is according to the new law, which has amendments regarding Cryptocurrency taxation.

2. Not All Cryptocurrency Are Taxable

Not all Cryptocurrency is taxable; only some of the pioneer ones have gotten this imposition. This was imposed in the first place to police the different criminal activities which were seeing a surge in the Crypto world.


 

Thus, if you are planning to get into the world of Cryptocurrency, remember if it is Bitcoin, every profit you make is taxable. Portugal is the only country that has no tax over legal Cryptocurrency usage.

3. The Taxation Acquired From The Profit Depends On The Size Of The Family

Yes, you saw it right; when it comes to Cryptocurrency, there are different ways in which you owe the tax.


 

For example, if you are someone living alone and trading over Cryptocurrency, the tax you owe will be different from the one who is the head of the household and has members dependent on them.

Is It Worth It?

There have been mixed feelings based on taxation because many investors loved the no-tax formula for Cryptocurrency.


 

However, the more digital currency became mainstream in the economy, this was bound to happen.


 

Plus, this taxation helps is regulation, and tax fraud is difficult because of the blockchain system.

 

The Voice of Dubrovnik

THE VOICE OF DUBROVNIK


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