{"id":368249,"date":"2019-01-15T20:00:15","date_gmt":"2019-01-15T20:00:15","guid":{"rendered":"https:\/\/uniquehot.com\/?p=368249"},"modified":"2019-03-11T20:38:36","modified_gmt":"2019-03-11T20:38:36","slug":"crypto-losses-bitcoin-tax-law","status":"publish","type":"post","link":"https:\/\/uniquehot.com\/news\/crypto-losses-bitcoin-tax-law\/","title":{"rendered":"Confusing U.S. Tax Laws Lead to $5 Billion In Unrealized Crypto Losses"},"content":{"rendered":"
Last year, the crypto community pointed fingers at tax payers liquidating assets in order to cover inflated tax bills due to the substantial gains realized during the 2017 Bitcoin bull run as among the chief reasons<\/a> the bear market had begun.<\/span><\/p>\n In 2018, however, the inverse happened, and most cryptocurrency investors suffered massive losses as the price of Bitcoin<\/a> and other cryptocurrencies fell by as much as 80-90% in most cases. With tax season rolling around again, investors should be liquidating assets in order to lock in realized losses that can be claimed on an individual\u2019s taxes, offsetting other aspects of the individual\u2019s tax bill, or possibly leading to a return.<\/span><\/p>\n However, new data reveals that only 34% of losses American cryptocurrency investors saw in 2018 have been realized, suggesting that most Americans don\u2019t understand crypto-related tax laws, and don\u2019t realize they can claim the losses on their taxes.<\/span><\/p>\n According to credit monitoring services company Credit Karma, United States citizens have suffered losses related to their cryptocurrency investments to the tune of $5 billion. However, only about a third of those $5 billion in losses will be realized losses, or roughly $1.7 billion.<\/span><\/p>\n When an individual American tax payer invests in a cryptocurrency, a cost basis is established for tax purposes. Selling an asset also triggers a taxable event. How much that asset has appreciated \u2013 or in the case of the 2018 bear market that is still currently ongoing, how much that asset has depreciated \u2013 at the time it is sold, determines what the individual is responsible for tax-wise. If an asset is never sold, the gains or losses are only paper gains and losses, meaning they cannot be claimed on an individual\u2019s taxes, but may still be reflected in one\u2019s portfolio.<\/span><\/p>\n Related Reading | U.S. Lawmakers Ask IRS for Clarity on Crypto Tax Laws<\/a><\/strong><\/em><\/p>\n The data suggests that either Americans don\u2019t understand that assets must be sold to trigger the taxable event and lock in unrealized losses that can be claimed on their taxes, or the HODL mentality has made it so they simply won\u2019t sell their assets for any reason \u2013 not even to lock in unrealized losses for tax reasons.<\/span><\/p>\n Credit Karma general manager Jagjit Chawla says it\u2019s the former<\/a>. <\/span><\/p>\n \u201cEven though those who sold their bitcoin at a loss can typically claim a tax deduction we found that before taking our survey, 61% of respondents who lost money on bitcoin didn\u2019t actually realize they could get a tax deduction for bitcoin losses,\u201d he explained. <\/span><\/p>\n<\/blockquote>\n The survey revealed that respondents were confused in general<\/a>, with more than half believing their losses were too small to make an impact, while others didn\u2019t even know they were required to file their cryptocurrency losses on their taxes. Not doing so could lead to severe penalties. Some claimed they didn\u2019t even know how to file their crypto losses.<\/span><\/p>\n Complicating things further, in the United States, cryptocurrencies are treated as property<\/a> and are subject to capital gains tax the same way real estate is. Capital gains tax rates vary by income levels, and are classified as \u201cshort-term\u201d and \u201clong-term\u201d depending on how long the asset has been held by the owner. Each classification also has different rates.<\/span><\/p>\nNearly Two-Thirds of American Crypto Losses Could Go Unrealized<\/span><\/h2>\n
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U.S. Crypto Tax Law Is Complicated, Varies By Duration of HODL<\/span><\/h2>\n