Saturday, April 7, 2018

Why does the U.S. government desperately want to tax cryptocurrencies? Because they made up 20% of all market capital gains

There is a growing concern by those who trade in cryptocurrencies as to whether or not they have to pay capital gains taxes on their profits earned.  And this has even led to unconfirmed stories on the Reddit boards of someone being hit with a $50,000 tax bill from the IRS.

Yet while many crypto traders want to believe that the government is going after their sector because Bitcoin and other cryptocurrencies are a real threat to the dollar, perhaps the answer really lies in a more mundane reason which is...

The government needs the money.

2017 saw the stock markets peak in December, and the current housing bubble begin to crack because of rising interest rates.  And for those who watched the market's overall last year, they know that the most spectacular moves took place in cryptocurrencies.

So with this in mind there is a very interesting report out on April 7 in which a fund manager calculated that 20% of the total amount of capital gains earned in all markets last year came from cryptocurrency trading.  And because of this, it appears that the IRS wants its cut.

Tax season in the U.S. is here, and many citizens who use or hold cryptocurrencies are clamoring around trying to figure out how to file their capital gains taxes. According to reports from Fundstrat’s analyst Tom Lee, cryptocurrencies represent roughly 20 percent of last years U.S. capital gains. 
Cryptocurrencies were a great investment last year, and the tax man is interested in individuals who cashed out into fiat raking in some gains. The reason for this is because the U.S. Internal Revenue Service (IRS) treats cryptocurrencies as a commodity-like investment vehicle, which is subject to the nation’s tax laws. Further, nearly every bitcoin or alternative digital currency transactions, which includes the collection of airdrops, trades, spending, and almost every type of exchange is considered a taxable event for U.S. citizens. 
Fundstrat’s Tom Lee believes Americans owe a lot of money for cryptocurrency investments in 2017, with owed capital gains topping roughly $25 billion USD. This means out of all the traditional investment vehicles like stocks, equities, and precious metals cryptocurrency-related capital gains taxes is estimated to be over 20 percent according to Lee’s findings. Lee details that the current digital currency bear market may have been primed by tax-related sales this year. Bitcoin News
With the advent of two court rulings on cryptocurrencies having deemed them as property, and subject to capital gains taxes similar to how gold and silver are taxed (collectibles), the IRS has in place guidance on virtual currencies.   And as more exchanges fall under government regulatory authority, the only way one can evade paying taxes on their trades is to do so peer to peer, which at this time probably results in less than 1% of all crypto transactions.

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