Bitcoin has grown to become the most popular cryptocurrency in the world and is the first cryptocurrency to hit the market. Bitcoin is a virtual currency that can be bought, sold, mined or used as a medium of exchange for buying currency denominated products. In theory, it is more secure than traditional fiat currencies due to the complicated cryptographic functions it uses to authenticate and secure transactions.
Just like cryptocurrencies in general, Bitcoin is not controlled or regulated by a central governing body or centralized system that monitors transactions between users. An anonymous individual or group of individuals under the name of Satoshi Nakamoto drew up the technical outline for Bitcoin the way we know it today.
2009 witnessed Bitcoin become the first cryptocurrency to see the light of day. Since then, Bitcoin has amassed a significant amount of attention worldwide, resulting in a massive spurt in the number of cryptocurrencies on the market. Currencies such as Litecoin, Ethereum, Zcash, and Dash have since then joined the fray.
Bitcoin was initially employed only for private exchange for the first three years since its inception. However, 2012 saw WordPress became the first company to accept Bitcoin payments.
Characteristics of Bitcoin
Before we get into the subject of paying Bitcoin taxes (or crypto taxes) andusing a Bitcoin tax discount code, it is vital to have a fair idea about Bitcoin and its characteristics.
Transactions are Irreversible
Bitcoin transactions cannot be reversed. Once a transaction is authenticated and added to the blockchain it cannot be altered or reversed. All transactions added to the blockchain are final as they have been verified by the network as authentic.
Bitcoin transactions are pseudonymous, which means that it is not possible to identify the real-world location or names of people associated with the crypto accounts you are doing business with.
You receive Bitcoins on addresses that are typically made up of multiple characters. You can trace the flow of the transaction, but you cannot determine the real-world identity of the other party in the transaction.
No Single Point of Control
Bitcoin is developed on a decentralized system. This means the entire Bitcoin network is regulated by members of the network and all transactions are authenticated by a network of computers. In traditional monetary systems, the entire system would be regulated by a central authority, giving the system a single point dependency, thereby, increasing the chances of a catastrophic failure due to the presence of a Single Point of Failure (SPOF).
Not Affected by Economic Factors
Bitcoin is independent of external influence or manipulation, as it is regulated by participants on the Bitcoin network. Bitcoin is also limited in its production to 21 million Bitcoins since there is a limited production of this cryptocurrency it also makes it immune to other economic anomalies like inflation.
Bitcoin Tax in the US
In India, bitcoin is subject to several restrictions. As per the Internal Revenue Service (IRS), Bitcoins are taxed the same as any other asset or property. The amount of tax to be paid varies depending on how long you have held your Bitcoin.
For instance, If you purchase a Bitcoin and choose to hold it for one year before selling it, you will have to pay long term capital gains tax on the profits made during the sale.
Everyone knows that filing regular taxes has always been challenging. However, with Bitcoins brought into the picture, the process becomes much more strenuous.
Consider choosing a Bitcoin tax calculator (and a Bitcoin tax discount code, if possible) to remedy this.
Bitcoin Tax Types
There are primarily two types of capital gains tax you must aware of, long term and short-term. As mentioned earlier, the tax you owe will ultimately depend on how long you have held on to your Bitcoin. Capital gains must be declared on form 8949.
If you sell your Bitcoin in less than a year from the time you bought it, you would be liable to a short-term capital gains tax on the profits generated from the sale of the Bitcoin.
However, if you sell your Bitcoin after a year from the time you bought it, you would be liable to pay long-term capital gains tax. This tax could be 0%, 15%, or 20%. It completely depends on your taxable income.
If you wish to avoid paying short-term capital gains tax, it is recommended that you keep your Bitcoin for more than a year.
Bitcoin Tax Evasion
The IRS plans on scrutinizing those who are channeling payments into cryptocurrencies to avoid paying taxes.
Ryan Korner, a senior agent in the LA office of the Criminal Investigations Department of the IRS, told reporters that they now have the tools and ability to observe and track those channeling payments.
The agent also mentioned that they are now in a position to identify and trace Bitcoin tax evasion attempts. With this in mind, it is advisable to play by the rules and file your crypto taxes on time. Make sure you use a Bitcoin tax calculator and a Bitcoin tax discount code if available.
Different Bitcoin Tax Calculators and Bitcoin Tax Discount Codes
An immensely popular Bitcoin Tax Calculator, it has an online platform that allows its users to import their data and Bitcoin transactions throughout the year from a multitude of major crypto exchanges.
It offers Bitcoin Tax Discount codes regularly. Make sure you sign up for their free email list to be up to date on the latest Bitcoin tax discount codes.
Zenledger is an excellent service provider for Bitcoin taxpayers. It allows users to import their cryptocurrency transactions and calculate their capital gains in seconds.
When you import the transaction history, ZenLedger’s crypto tax tool generates a variety of parameters such as capital gains, income, donations, closing reports, profit and loss statements, and auto-fills tax forms.
BearTax is widely known for its easy to user interface and a design language.
It comes with a variety of useful features and reasonable prices, making it a bitcoin tax calculator worth your time.
BearTax is compatible with all the leading cryptocurrencies and exchanges on the market. It also plans on introducing some innovative and intuitive features soon.
CoinTracker is one of the best crypto calculators to christen the market. Known to be able to support just about every crypto exchange there is, you can expect this cryptocurrency tax software to allow you to generate instant tax reports without any hassle.