Taxation of Cryptocurrency Gains refers to the process by which the profits realized from the sale or exchange of cryptocurrencies are subject to tax.
In many jurisdictions, cryptocurrency is treated as property rather than currency for tax purposes. This means that when an individual sells or trades cryptocurrency, any gain from the transaction must be reported as taxable income. The gain is typically calculated as the difference between the selling price and the original purchase price (cost basis).
For example, if an individual purchased one Bitcoin for $10,000 and later sold it for $15,000, the taxable gain would be $5,000. This gain may be subject to capital gains tax, which can vary based on factors such as the holding period of the asset (short-term vs. long-term) and the individual’s overall income level.
Taxpayers are required to keep accurate records of all cryptocurrency transactions, including dates, amounts, and the fair market value at the time of the transaction to ensure proper reporting and compliance with tax obligations.
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