All

Does Tax Apply To Cryptocurrency?

While cryptocurrency is considered a currency by many people, it is not always seen that way by governments and tax organizations. In fact, cryptocurrency is so new that some countries do not know how to tax it yet, and others are having to create new rules to accommodate it.

How does tax on cryptocurrency work, and what should you keep in mind if you are worried about being taxed too much?

Crypto Value and Tax

Since crypto is directly exchangeable for regular currency at a varying rate, tax is usually calculated relative to the crypto’s current value in that country’s standard currency. If the crypto doubles in value, then so do the numbers involved in figuring out the value of your crypto for tax reasons.

Because of this, it can be a surprise to find that crypto tax will change quite rapidly. It’ is all based on what you are actually earning: if you buy low and sell high for maximum profit, then the tax will often adjust to match the spike in value.

This can vary between countries and particular situations, so it is always a good idea to double-check if you are trying to calculate your tax yourself. The more you know about the equations involved, the easier it becomes to properly apply them.

Cryptocurrency Isn’t Always Currency

It is important to understand that many different countries do not consider cryptocurrency to be a regular currency, unlike the dollar (or whatever your local standard is). In fact, they sometimes treat it like an asset, meaning that it is more of a thing that has value instead.

Australia is a good example. The Australian Taxation Office treats crypto as property, so it is subjected to capital gains tax. Since CGT applies to the sale or disposal of an asset for profit, the gains and losses of each crypto sale are used to help calculate the tax involved.

Because of this system, Australian crypto users are able to calculate tax on cryptocurrency quite easily. It uses the same tax brackets as regular capital gains tax, including the same situations for discounted tax amounts and particular bracket breakpoints.

It Depends How You Use It

While crypto might be a core part of your life, it is not the same everywhere. Some countries still do not really tax it properly, and others do not even consider it a currency unless you are using it in certain ways. Once again, Australia can be a good example of this since they have certain laws for it.

Under the Australian legal system, crypto is considered an asset. However, it also has certain use laws applied to it. This means that using it for entirely personal purposes can often result in tax being reduced or even eliminated, at least under certain conditions.

For example, buying something online with cryptocurrency that you have purchased might clear the tax since you are using it as regular currency. However, if you were using it to make money or as part of a business, then it would be counted as an asset since it has a direct impact on your income.

Related Articles

Leave a Reply

Back to top button