Well, at least a bit of good news.
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Good news I hope
I saw this earlier! I am very glad to hear about this. Tracking everything would be a pain, and I have been going over my wallets trying to get everything together. I saw a few people mention that it should only be considered income on our taxes when you cash out, so there is no need to claim anything on our taxes if we just HODL. So, if you cashed out $500 in USD, you’d claim that as income, and that’s all we’ll need to do for the time being.
@Cbarnett (as well as @Talbertc6 & @NachLibre) That’s not what the rule was originally and it’s not what the revised rule is now. The rule was for INFORMATIONAL REPORTING to the IRS…it has nothing to do with taxes. It does not impact income and the reporting of capital gains/losses. That still applies.
You still have to track every “taxable event.” What you don’t have to do is report WHO you bought something from using crypto or WHERE you exchanged one crypto for another, or if someone bought something from you with crypto WHO they were, or WHERE (pool) you mined your crypto. That was the pain in the ass miners don’t want. Taxes are another story.
Mined BTC worth $500 and it moved to your wallet, report as income. Sold that later for $600, you have a $100 short or long term capital gain. Or used it to exchange for ETH, same thing. Or used it to buy a miner with BTC, same thing.
The IRS will still consider all crypto “property” subject to gain and loss when that happens.
The IRS will still consider all crypto that hits your wallet (not the pool wallet) as income and as the cost basis for capital gains/losses.
With regards to “I saw a few people mention that it should only be considered income on our taxes when you cash out,” the IRS considers having control of the crypto as a taxable event, not just when you sell it. It is property and has value, in the same way that when my company gave me a car, I had to report the value on my taxes (because the company reported it on my W2, but not subject to SS/Med). When I sell it or trade it in, I will have a long term capital loss (the value will be less) that I will report.
You get something of value, you have to pay taxes on it. But if you are doing crypto as a business, you can offset income/gains with expenses. Note that if you end up with a gain, you’ll have to pay self-employment tax on that.
Here’s the best way I could explain it to a friend.
You’re on a TV game show and win $10,000. You have to report it and pay taxes on it.
You’re on a TV game show and win a trip worth $25,000. You have to report it and pay taxes on it.
You’re on a TV game show and win $10,000 worth of BTC. You have to report it and pay taxes on it.
“What if I was gifted the BTC?” That’s subject to gift tax if the value is above $15,000, (applies whether cash or assets like BTC).
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