As we move into the last quarter of 2019, it is a good time for traders of all types to begin thinking about their taxes. The tax code can be incredibly complicated, especially when it comes to things like tracking, reporting, and paying taxes on cryptocurrency gains.
In our recent interview, we sat down with Patrick Camuso. Patrick is a North Carolina-based CPA who has a special focus on cryptocurrency taxes and other related topics. We asked Patrick about his experience as a crypto accountant and learned more about how you can prepare for tax season.
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Do cryptocurrency earnings need to be taxed?
Though Patrick recognizes there is plenty of misleading information out there telling you otherwise, cryptocurrency is, in fact, subject to federal taxes. This applies to all cryptocurrency gains, regardless of whether you are purchasing Bitcoin or anything else. Depending on your trading strategy, the rate and amount you pay can vary tremendously. Your trading strategy (day trading versus holding), your citizenship and country of residence, and other variables can influence the net cost of trading.
What are some strategies for minimizing future tax obligations?
One thing that Patrick made clear is that day traders will almost always end up paying more taxes than long-term holders. This is because day trading increases the amount of “taxable events” occurring within your portfolio each year. Patrick also discussed how “wash trades” have certain rules that are unique to the crypto marketplace. In order to minimize future tax obligations, you should learn more about how crypto is taxed and—depending on your current needs—also consider hiring a crypto-oriented accountant.
Ways to Prepare for Tax Season
Even if most of your taxes are not due until April, any accountant like Patrick will tell you the best way to have a stress-free tax season is to begin preparing as far in advance as you possibly can. Additionally, tracking your crypto trades on a monthly or at least a quarterly basis will make it easier to recognize how much you’ll need to end up paying. Taxation is, inevitably, a part of trading crypto. Taxation should not be viewed as an afterthought, rather, as an essential part of your overall trading strategy.
Our interview with Patrick touched on all of these subjects and more. Take a listen to what Patrick had to say and let us know what you think!
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Disclaimer: I am NOT a financial advisor, and nothing I say is meant to be a recommendation to buy or sell any financial instrument. I will NEVER ask you to send me money to trade for you. Please report any suspicious emails or fake social media profiles claiming to be me. Don’t invest money you can’t afford to lose. There are no guarantees or certainties in trading or investing.
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