Crypto Taxes In 2021: What Should You Know?

You must have heard the proverb: there are only two certain things in life, death and taxes. But when it comes to cryptocurrency, many ask themselves a question: do I have to pay taxes on crypto? This depends on where you live, but most likely, the answer is yes. There is crypto taxation legislation in most of the developed and in some developing countries, and citizens have to report their crypto savings.

The requirements can be very different: in some countries, you only pay taxes when you are taking profit from crypto and transferring it into fiat or paying for goods; some countries are crypto havens with no crypto taxes at all. Let’s take a deeper look at what crypto taxation looks like worldwide.

What causes a taxable event in cryptocurrency?

In the USA, If you buy crypto, you don’t pay any taxes. And you can HODL it as long as you want without having to pay anything, too — no taxable events are triggered in case you store your assets in a private or exchange wallet. Unsold coins are unrealized gain.

How is crypto taxed when it is sold?

Is crypto trading taxed?

The tax on cryptocurrency trading in the USA is the same as on selling crypto assets. If you trade on an exchange, you trigger taxable events. The profit that you get from the bargain is subject to capital gains tax. That’s why it’s important to keep track of all your trades in terms of tax declarations. Many exchanges have tools that facilitate this.

For crypto stored in the short-term and the long-term, taxes are different

Here’s the good news: in America, you pay less in the case of long-term storage. The short-term tax is paid on one’s regular tax rate which depends on how much a person earns overall: their salary, crypto and other property, stocks, and other assets. The short-term capital gains tax may be 10–30% depending on the total income. In the long-term tax, if the yearly income is lower than $40,000 overall, you don’t have to pay taxes for the sold crypto at all. This is a great incentive to HOLD your coins for a year and longer.

What is the tax policy for the case of money loss?

Taxes on mining rewards, airdrops, and crypto loans

When it comes to crypto loans, it gets more simple. You can get a loan in fiat with cryptocurrency as collateral. Both the cash that you get and the crypto with which you repay the loan do not trigger taxable events. The tax here only arises if the loan is not repaid on time.

Crypto taxes around the world

The USA

Canada

The UK

Germany

China

Australia

Crypto tax havens: where do you pay no tax on crypto?

Here’s the list of countries that have no tax on crypto:

  • Hong Kong
  • Malaysia
  • Portugal
  • Singapore
  • Slovenia
  • Switzerland
  • Cayman Islands

How to keep yourself updated on the crypto tax laws?

It is likely that in your country, cryptocurrency is treated as property, and taxable events are selling it for fiat or paying with it at stores and online services. It might be better in terms of tax to take profit from crypto held in the long term, and capital losses may be deducted from your taxes. However, this is the case far not for all countries.

It may not be easy to delve into crypto tax laws yourself, and it’s especially challenging to keep yourself updated on all their changes. In countries that have only started to recognize crypto recently, such changes can occur especially often. That’s why the best strategy may be looking for a good specialist and contacting them for clarifications. Luckily, many crypto tax experts have their YouTube channels, so finding one specifically for your country may be the best way to start exploring tax rules that apply to you.

ChangeNOW is an instant cryptocurrency exchange service for limitless crypto conversions. We support over 200 coins and are account-free! https://changenow.io/