Shehan Chandrasekera of CoinTracker said that US-based crypto users should understand long-term capital gains taxes.
Bitcoin has doubled in price last month. The price of Ethereum has doubled in the past two weeks. And the global cryptocurrency market is currently over $ 1 trillion. This figure is twice that of mid-November.
So is it selling when the price is high?
Don’t sell cryptocurrencies right away, says Shehan Chandrasekera, Head of Tax Strategy at the crypto tax software company CoinTracker.
Chandrasekera said that crypto users who post US taxes should pay attention to capital gains taxes imposed on the difference between the purchase price and the selling price of a cryptocurrency.
“The amount of taxes you pay for this earning depends on how long you keep that money before you sell it,” he explained.
Cryptocurrencies held for more than one year are taxed at long-term capital gain rates of 0%, 15% and 20%. Cryptocurrencies held for less than this period can be taxed at short-term rates between 0% and 37%.
IRS says taxpayers must answer for crypto purchases
The United States Internal Revenue Service (IRS) has published revised draft instructions for tax returns in 2021, clarifying that cryptocurrency purchases count as digital currency transactions.
For example, in 2021, single (i.e. unmarried and childless) applicants will earn 0% for the first $ 40,400 of taxable income (including profit from sales), 15% for amounts between $ 40,401 and $ 445,850, and income and pays 20% for earnings. These thresholds are higher for married people.
Chandrasekera said, “The long-term capital gains rate is extremely favorable. We are talking to these wealthy individuals, they never sell stock positions of any kind without holding them for 12 months or more. So I encourage you to do the same. Just get HODL. ”
As for whether it will sell in a year or so, Chandrasekera has one truth to share: “If you decide to wait forever, it is completely tax free.”