- This topic has 15 replies, 2 voices, and was last updated 8 months, 1 week ago by jakeba75.
- Thursday, March 31st, 2022 at 17:05 #205446Telefrag_EntParticipant
I’m trying to understand how to play taxes on my buys, sales, and trades, and it just doesn’t seem right, so I wanted to consult with you financial experts.
Let’s say I was buying BTC every month in 2015 and by the end of that year I had 1BTC. I’ll use some easy numbers for simplicity’s sake.
In 2021 I sent that 1BTC to Coinbase so I could trade it for my favorite alt coin. I converted 1BTC to 10,000ALT.
The USD in play here was:
Paid $1000 for 1BTC
Traded $50,000 BTC for $50,000ALT
So question 1: I owe long term gains tax on $49,000? Even though I never got.any.USD out of this exchange?
Next, I sold my 10,000ALT for $100,000USD.
Paid $50,000 in BTC for ALT
Sold $100,000 in ALT for USD.
Question 2: I now owe short term gains on another $50,000?
This feels like I’m getting hit twice, but maybe that’s just the way it is? Makes trading feel more dangerous than I imagined. Hope someone smarter than me can clear this up or confirm math. Thanks!Thursday, March 31st, 2022 at 17:05 #205447Ding-L-Berry
Question 1: yes
Question 2: yes
Are you double taxed? No. You turned 1k into 100k so you are taxed on 99k of earnings.Thursday, March 31st, 2022 at 17:05 #205448surrender_the_juice
First you get taxed on your income.
Then you get taxed on your purchases.
Next they tax you each year to continue owning your purchases.
Finally they tax you when you die.
**We are getting way more than double taxed my friend.**Thursday, March 31st, 2022 at 17:05 #205449boomstickbutcher
This is my same fear and question… getting double taxed. Thank you for asking this and getting it sort of clarified for me.Thursday, March 31st, 2022 at 17:05 #205450BufordTannen85
Your original basis was $1000 so if btc was worth $50000 when you traded it, then you owe tax on the difference. The amount of tax depends on how long you held the btc.
Then you acquired the alt and the basis is now $50000. If you sold the alt at $100000, then you owe tax on the difference. The amount of the tax depends on how long you held the alt.Thursday, March 31st, 2022 at 17:05 #205451FinishGloomy
Also note that 1btc to 10,000alt is also a taxable eventThursday, March 31st, 2022 at 17:05 #205452zergtoshi
Remember: you don’t get poor by paying tax on gains. In the end you have more money in your bank account than before.
This comes with a caveat: make sure to set aside money to pay the tax for each trade that has taxable gains. Otherwise you might end up in a situation where tax is due, but the crypto went down much and isn’t enough to even pay the gains.Thursday, March 31st, 2022 at 17:05 #205453madeofsyrup
Don’t just voluntarily pay taxes, it’s their job to figure that shit out and government workers are inherently lazy.Thursday, March 31st, 2022 at 17:05 #205454002timmy
You’re correct, but not being taxed on the buy of the alt. Whenever you make a swap, you need to convert it to the fiat price for the “earnings” portion. It’s the same concept as getting paid in crypto.Thursday, March 31st, 2022 at 17:05 #205455homrqt
We get hit like 5 times on our income tax….Thursday, March 31st, 2022 at 17:05 #205456ChiTownBob
You have two different profits, so you get taxes once on each profit.Thursday, March 31st, 2022 at 17:05 #205457YamahaFourFifty
Welcome to the circle jerk that is taxes. Tax your income, tax your investments, tax your purchases, tax your food and gas, car, land, etc etcThursday, March 31st, 2022 at 17:05 #205458International-Fun485
Government sucks manThursday, March 31st, 2022 at 17:05 #205459DayOne15
Yes, you made 99K of profit. That’s what you owe taxes on.Thursday, March 31st, 2022 at 17:05 #205460oriley-me
You put in $1000 and ended up with $100k. You get taxed on the $99k you gained. You’re not being hit twice, wouldn’t matter if was 2 trades or 50 trades the result would be the same.
Edit: I missed the long vs short term part but the point remains. Each $1 of gain is only being hit once, at whatever rate is relevant.Thursday, March 31st, 2022 at 17:05 #205461jakeba75
> This feels like I’m getting hit twice
You are, but that’s because you made money two different ways. You are getting hit once for the profit you made from Bitcoin and once for the profit you made from ALT.
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