FIFO is a contraction of the term “first in, first out,” and means the first coins you purchased are the first coins you sold. FIFO is the most conservative way to calculate capital gains, and also the easiest. Here is how you can calculate your capital gains by hand using the FIFO method. First, download […]
Donating Cryptocurrencies as a Tax Strategy
Selling cryptocurrencies can trigger capital gains taxes which, depending on your tax bracket and whether your gains are short term or long term, can result in a significant amount due to the IRS. One way around this is to donate coins to your favorite charity. Let’s say you were lucky enough to buy 1 bitcoin […]
Taxation of CryptoKitties
A popular new game has emerged online based on the Ethereum platform: CryptoKitties. Players can buy and sell virtual cats which they can breed and create new unique virtual cats in return. Virtual cats may sound like a joke, but the business surrounding this new craze is no laughing matter: according to CNBC, players have […]
How to Deduct Bitcoin Mining Costs
Clients who mine cryptocurrencies often ask me what they are able to write off. The short answer is it depends if their activity is classified as a hobby or a business. Either way you can write off expenses, but as noted below, the amount you can write off varies depending on how the IRS classifies […]
Theft and Loss of Cryptocurrencies
Recently a client of mine, who I will call John for privacy sake, painted himself into a corner and lost access to his cryptocurrency account which contained thousands of dollars in alt coins. He generated a code to encrypt his wallet and saved the code to Amazon Drive. Unfortunately, John’s Amazon drive synced over his […]
To Report or Not to Report Cryptocurrency Gains
The temptation for cryptocurrency investors to not report gains is strong considering the IRS has a poor track record of catching cryptocurrency tax evaders. Only 802 people reported cryptocurrency gains or losses in 2015, which is even 91 less honest filers than the year before. The temptation to not report gains is possibly even stronger […]
IRS Guidance 101 on Cryptocurrency Taxes
Whether you hold ethereum, bitcoin, neo coin or some other form of digital currency, the IRS has provided guidance on how to treat your crypto portfolio for tax purposes. This may come as a surprise, but the IRS does not tax cryptocoins as a currency but rather as property. Per IRS bulletin 2014-21, “For federal […]
