As with most investments there will be taxes to consider before figuring out how much you really made — or lost — on your digital assets.
Before you can figure out your tax obligations, you first have to be clear on what is considered a taxable event when it comes to buying and selling crypto.
But what you do with your crypto after you first buy it may well be a taxable event.
Using crypto to pay for things: In the United States, you can use cryptocurrency to buy products or services. But it is not treated as cash for tax purposes. Instead it is considered property.
To make matters more confusing, using crypto to buy something technically counts as selling your crypto. So you must report any capital gain or loss on that sale, which will be determined by the difference — in US dollars — between how much you paid for the currency and its value when you used it to buy something.
If you held the crypto for a year or less and it appreciated in value, your capital gain will be taxed as ordinary income. If you held it longer than a year, then it would be subject to capital gains tax rates.
If it lost value, you may use that capital loss to offset any capital gains you incurred in other investments.
