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One of the reasons for the growing popularity of Bitcoin is its low fees and costs. Bitcoin is a decentralized digital currency. And this means it is not subject to government control through the central bank like the conventional fiat currencies. For many, this provides an excellent opportunity to avoid or evade the annoying government-imposed taxes.
Another essential feature of Bitcoin is anonymity. With its underlying cryptography technology, you can use Bitcoin without revealing or providing your real identity. And this has created an excellent opportunity for many people and entities that don’t wish to have their identities known when they trade, donate, buy or sell.
With its status as a digital asset and asset, Bitcoin provides an attractive investment alternative to traditional assets. Even if you don’t understand Bitcoin trading, you can find help through this site QUANTUM-AI-TRADING.COM for many existing Bitcoin trading resources.
Should You Pay Taxes on Bitcoin?
Although Bitcoin is decentralized and provides anonymity, you will be surprised to realize that you must pay taxes. Understanding this is essential to avoid problems with the IRS or other government agencies. Essentially, you must know what legal obligations in terms of taxation you have when you mine, buy, sell, or trade Bitcoin.
In the U.S., the government does not consider Bitcoin a currency. Instead, it classifies Bitcoin as property. And this has several implications for you as a Bitcoin user. It means you must pay taxes based on the current value whenever you receive any Bitcoin payment.
Additionally, the government expects you to pay tax whenever you sell Bitcoin for a profit. In this case, the basis of the tax is the difference between the buying price and the sales earnings. Since the government classifies Bitcoin as an asset, using it has similar tax implications to traditional assets such as stock and real estate.
Reporting Bitcoin Taxes
Another unique feature of Bitcoin taxation is that the responsibility of reporting the taxes is solely on the user. For most users, accessing or keeping track of all the Bitcoin uses, including the losses and gains, is not easy. The government does not require crypto brokers to send relevant forms with all these records.
Legal Ways to Avoid Bitcoin Taxes
Here are a few legal ways to avoid paying Bitcoin taxes.
Hold Bitcoin
You can avoid paying Bitcoin taxes by holding it over the long term. That way, the government cannot tax you for selling Bitcoin. Since you are holding it as an investment and not earning from it, you don’t owe the government any taxes.
Donate to Charity
Donating Bitcoin to charity means you are exempt from paying capital gains tax. And this can be an appropriate strategy to avoid taxation for those keen on helping specific charity courses.
Gift Your Family
You can legally avoid paying Bitcoin taxes by giving it as a gift to your family. You can provide as much as $15,000 to every person each year without paying taxes. What is more interesting is that even the recipient will not pay any gift tax unless they sell or use it later for a profit.
Conclusion
Cryptocurrency is still a new concept. Governments are still yet to adopt specific regulations on them. At the moment, though, the U.S. government considers Bitcoin an asset. As such, it imposes capital gains tax on it whenever you sell or use it for profit. Nevertheless, there are several legal ways to circumvent this.
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