Cryptocurrencies and Taxations: Are You Among The Ones Paying Crypto Taxes?

• Cryptocurrencies are not free from the obligation of taxes, just like other forms of income. 

• Certain countries mandate crypto taxations depending upon their rules and regulations. 

• But do we really need taxes in the crypto space when decentralisation was its core focus?

Are We Really Liable To Pay Crypto Taxes?

Just like other forms of income, gains from cryptocurrencies are also taxable. And the year 2022 was said to bring taxations and regulations for the asset class. Taxes in the crypto industry are calculated on the date at which the taxpayer receives them.

While receiving crypto assets, whether it is from mining them, betting on them, provision for a service, making loans from which interest is generated or obtaining rewards, all of these forms are put in the category of receiving incomes. And hence, need an obligation of taxation. 

The general rule among the creators and developers of major cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Dogecoin (DOGE) etc., was that the entities choosing the asset class for investment must keep track of their profits, losses, report and record them accurately and furthermore pay taxes. However, trying to lessen the tax burden might become another way to generate high profits. 

Many exchanges also allow traders to keep track of their taxes due, as they keep all the information organised by facilitating free exports of all trading data. 

Some of the countries mandating the obligations to pay crypto taxes are the USA, Canada, UK, Australia, India etc. 

In the USA, the tax rate on Bitcoin capital gains might vary between 0 and 37 per cent if you sell them within a year. Whereas, if the crypto asset is held for over a year, the tax rate can be comparatively lower, varying between 0 to 15 per cent or maybe 20 per cent, depending on the income.

Whereas, if we talk about Canada, if an individual’s crypto is taxed as a capital gain, he will only pay Capital Gains Tax on half of the profits from a transaction in crypto. And with respect to Income Tax, you would be paying 15 per cent to 33 per cent.

In the case of the United Kingdom (UK), unlike many countries, the UK does not have a short-term and long-term Capital Gains Tax rate. Instead, all capital gains are taxed under the same rates. The amount of payment of Capital Gains Tax varies depending upon the earnings.

However, it is a matter of discussion if cryptocurrencies should or should not have the provision of taxes. Because taxation tags along with the involvement of central authorities. But wasn’t decentralisation the primary motive of introducing cryptocurrencies? 

Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.

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