![]() ![]() ![]() People might refer to cryptocurrency as a virtual currency, but it's not a true currency in the eyes of the IRS. You may have heard of Bitcoin or Ethereum as two of the more popular cryptocurrencies, but there are thousands of different forms of cryptocurrency worldwide. Transactions are encrypted with specialized computer code and recorded on a blockchain - a public, distributed digital ledger in which every new entry must be reviewed and approved by all network members. Part of its appeal is that it's a decentralized medium of exchange, meaning it operates without the involvement of banks, financial institutions, or other central authorities such as governments.Ĭryptocurrency has built-in security features. The term cryptocurrency refers to a type of digital asset that can be used to buy goods and services, although many people invest in cryptocurrency similarly to investing in shares of stock. Whether you accept or pay with cryptocurrency, invested in it, are an experienced currency trader or you received a small amount as a gift, it's important to understand cryptocurrency tax implications. Interest in cryptocurrency has grown tremendously in the last several years. Increase your tax knowledge and understanding while doing your taxes.Ĭryptocurrency's rise and appeal as an alternative payment method Filers can easily import up to 10,000 stock transactions from hundreds of Financial Institutions and up to 20,000 crypto transactions from the top crypto wallets and exchanges. Whether you have stock, bonds, ETFs, cryptocurrency, rental property income or other investments, TurboTax Premier has you covered. Have questions about TurboTax and Crypto? Our Cryptocurrency Info Center has commonly answered questions to help make taxes easier and more insightful. Keep records of your transactions so that you can inform the IRS of all your crypto activity during the year.You report these taxable events on your tax return using various tax forms.When you earn income from cryptocurrency activities, this is taxed as ordinary income.The IRS treats cryptocurrency as property, meaning that when you buy, sell or exchange it, this counts as a taxable event and typically results in either a capital gain or loss.You may get lucky but you may as easily get burnt. I say go for it if you want to have some fun, but only with money you can afford to lose, unless you really consider yourself a cryptocurrency expert.īut please beware the many companies out there trying to sell you a Bitcoin “investment” as a sure-fire way to make money. That may encourage some people to try their luck. Don’t get into Bitcoin unless you understand the risksīitcoin is having a good 2023, with its value up 75% year-to-date. ![]() I didn’t like the feeling that I had no control at all. The problem is, I had no idea why it was going up or down and saw no way to even remotely forecast which way it would go. I could swallow a $50 hit and I saw the experience as a bit of fun to see what would happen to the $300. I saw it rise to about $500, then drop suddenly, only to go back up again.Īfter a few months later, I withdrew it all at a loss of $50. My Bitcoin lossĪ few years ago when everyone seemed to be talking Bitcoin up during one of its highs, I bought $300 of it. I suspect die-hard crypto experts who do nothing but study Bitcoin and other similar currencies such as Ethereum will disagree with me, but this article isn’t aimed at them, but at the less-well-informed majority. One reason Bitcoin is hard to predict is because the mechanics behind it are so complex that most people don’t understand them and therefore don’t have the same knowledge they have of more traditional investments. Yet few stocks or commodities have experienced the white-knuckle ride of Bitcoin, and that propensity for it to move suddenly, sometimes seemingly with no warning, is why it is so much harder to predict, and why it is closer to gambling than investing in my view. Of course, most investors know that there is always the risk of their investment tanking due to big world events such as COVID-19, or due to more localized or company-specific issues. You can also get financial advice from experts who know the markets and the system. These are all questions you can answer using research to help inform you of potential outcomes.
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