The US tax season has begun, and this might finally be the year to declare your bitcoin and crypto-assets. Sure, bitcoin taxes can be complicated, but research suggests that 61% of holders don’t realize they can write off last years losses as a tax deduction.
BITCOIN? WHAT BITCOIN?
3 years of solid (53 percent in 2015) to phenomenal (1245 percent in 2017) growth, have seen bitcoin gains conveniently overlooked on many tax returns. But with bitcoin losing over 70 percent of its value last year, many investors will have sold at a loss.
This may prompt a surge in cryptocurrency tax declarations filed for 2018, according to Gidi Bar Zakay, CEO and founder of Bittax. However, according to a survey carried out in November 2018 by credit-score provider Credit Karma, it may not.
They found that US investors who ‘cashed-out’ their bitcoin in 2018, collectively lost $1.7 billion, or an average of $718 per person who cashed out. However, results also showed that only a third (35 percent) of investors who sold at a loss plan to report.
In fact, before taking the survey, 61 percent of Bitcoin investors who lost money, didn’t realize they could claim a tax deduction.
BITCOIN TAXES: 53% DON’T INTEND TO REPORT
But these people could be missing out, as capital losses can be used to offset capital gains, or even claim a tax refund. After learning of the rules, over half of investors (with either gains or losses) said they would be more likely to report.
In fairness, 53 percent of investors surveyed said they did intend to report gains or losses, with 19 percent undecided. Strangely, more investors who gained were likely to report (59 percent) than those who lost money (38 percent). Or at least, that’s how they answered the survey.
Reasons for not reporting included thinking losses/gains were not significant enough (57percent), and falsely believing it isn’t required (35 percent). 22 percent of respondents claimed they did not know how to report gains or losses.
The basic trick is to subtract the price you bought the bitcoin at from the price you sold it, leaving the profit or loss. But this might not be as easy as it sounds, according to the CEO of Libra, promoting his crypto-tax calculator. This is because cryptocurrency brokers don’t have to provide customers with the same form that stockbrokers do.
Still, if you’re sitting on a substantial loss, and want to claim tax relief on that, it may be worth hiring an accountant.