Taxes on crypto currency

A

azerogo

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Not sure if this should be in taxes, but might be more applicable here.

Just seen on reddit, a warning to a lot of people I would assume.

 
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Hi,

Taxation on crypto currency investing is probably well worth a discussion thread here.

My understanding is that any profits earned on crypto trading are taxable, but losses incurred while trading cryptos cannot be offset against profits (regardless of them having been incurred in the same tax year, or on the same crypto currency etc.).

As such, it would be prudent for anyone who makes a profit on investing in a crypto currency, to then convert half of it back into Euro and put it away to go towards their tax bill.

Personally, I think it should be treated the same as investing in equities, but for reasons unknown to me, it's not.

It would be interesting to see the outcome of a discussion between Revenue and some top tax people on what should be allowed against profits on cryptos - exchange fees, internet access etc. Perhaps such discussions have already taken place ?
 
Spoke to a tax director from the big four on this, and he said it would be very naive to not treat the disposal the same as any other asset and CGT would most definitely apply to all gains.

He believes that would be revenues understanding should they ever find anyone that has made large gains on crypto sales.

Didn't have a chance to go into any further detail with him.
 
It depends how you’re investing.

For directly-held cryptocurrencies, it’d generally be CGT on gains and any losses would be allowable.

For someone whose sole income is derived from trading cryptocurrencies, there’s a risk that it would constitute a trade, with the result being income tax, PRSI, and USC on any profits.

Spreadbets on crypto derivatives would generally be tax exempt.

CFDs are generally subject to the CGT regime.

Crypto-ETFs depend on the domicile of the ETF (US being CGT, European 41% tax, etc).
 
Oh dear,

Very sorry folks ... just looked back at a note I had on this and I've made a mistake. It's actually P2P finance that I was thinking about when I posted the response above, but got my wires crossed.

Evidence that this male can't multi-task, if ever it was needed :redface:
 
azerogo said:
Not sure if this should be in taxes, but might be more applicable here.

Just seen on reddit, a warning to a lot of people I would assume.

Click to expand...

Thanks azerogo.

But I think the scenario painted above is highly unlikely to occur for anyone with an intellect greater than a squid.

Think about what this guy is saying. His 'friends' convinced him to part with most of his savings and spend it all on bitcoin for $900 a piece.
If that wasnt stupid enough he at least had the good sense to cash in for $120k. But instead of perhaps investing in less volatile options, buying a car, or buying a property or even a decent holiday abroad - he spent the whole lot on other alt coins!! The equivalent of nearly 2.5 times his annual salary.
Then, in an almost nonchalant fashion, proclaims he may have ruined his life.
Im surprised that this guy is able to manage crossing the road safely by himself.

There is always one...:rolleyes:
 
Simply put, he sold 120k worth of bitcoin, he bought 120k worth of altcoins (say 100 'NextBitcoin') so he realised around 120k gains. For simplicity we ignore the buying cost of bitcoin.
IRS want their cut. 50k usd.
If he sells his 100 NextBitcoin, he will get 30k usd and realise a loss of 90k usd.

I suppose he will have to cough up the remaining 20k usd and pay the IRS.
Then the loss will be carried forward for the next tax year.
 
It raises an interesting strategic issue which arises from buying volatile things.

If you sell Bitcoin at a loss and buy something else, you can use the losses forward against future profits.

If you sell Bitcoin at a profit, and reinvest the proceeds, and the new thing goes down in value, you have to realise that loss in the same year to use it against the gains. If you wait until the following year, you will not be able to use them.

For example
2016 Buy Bitcoin for €10,000
2017 Sell Bitcoin for €110,000
2017 Buy Ether for €110,000
2018 Ether falls to €10,000

Your net gain on the transaction is nil.
But you will have paid 33% CGT on the gain of €100,000 on Bitcoin.
You can set the loss of 2018 against the profit of 2017, but you can carry the losses forward against future gains.

If you sell the Ether in 2017, you can set the €100k loss against the €100k gain.

Brendan
 
TheBigShort said:
Thanks azerogo.

But I think the scenario painted above is highly unlikely to occur for anyone with an intellect greater than a squid.

Think about what this guy is saying. His 'friends' convinced him to part with most of his savings and spend it all on bitcoin for $900 a piece.
If that wasnt stupid enough he at least had the good sense to cash in for $120k. But instead of perhaps investing in less volatile options, buying a car, or buying a property or even a decent holiday abroad - he spent the whole lot on other alt coins!! The equivalent of nearly 2.5 times his annual salary.
Then, in an almost nonchalant fashion, proclaims he may have ruined his life.
Im surprised that this guy is able to manage crossing the road safely by himself.

There is always one...:rolleyes:
Click to expand...

Completely agree, but the trouble with the mainstream coverage crypto currencies have been getting means those who would be more financially illiterate are getting sucked into it believing it to be the golden goose that just keeps growing, i have read of a taxi driver in England who remortgaged his home to invest, no doubt he's regretting it now but I'm sure there is plenty more tales of woe to follow soon if the price doesn't start to increase soon.
 
azerogo said:
i have read of a taxi driver in England who remortgaged his home to invest, no doubt he's regretting it now but I'm sure there is plenty more tales of woe to follow soon if the price doesn't start to increase soon.
Click to expand...

Yes, I have read these too. The stuff of urban legend I would say. I didnt know banks approved large loans to buy bitcoin?

There is also the otherside, the pizza delivery guy who sold a pizza for 10,000 btc ($100 or $0.01c per coin). Apparently he is a multi millionaire now.
Never once, when the total value of those 10,000 hit $200, or $300 or even $500 or $1,000 did the pizza guy ever think of cashing in. Instead, the pizza guy, working minimum wage, held on and on until he was a multi-millionaire.

There is alot of concern around here also for the financial well being of us crypto holders. A fear has set in that we are in danger of losing everything!
 
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TheBigShort said:
Yes, I have read these too. The stuff of urban legend I would say. I didnt know banks approved large loans to buy bitcoin?

There is also the otherside, the pizza delivery guy who sold a pizza for 10,000 btc ($100 or $0.01c per coin). Apparently he is a multi millionaire now.
Never once, when the total value of those 10,000 hit $200, or $300 or even $500 or $1,000 did the pizza guy ever think of cashing in. Instead, the pizza guy, working minimum wage, held on and on until he was a multi-millionaire.

There is alot of concern around here also for the financial well being of us crypto holders. A fear has set in that we are in danger of losing everything!
Click to expand...

You’re kidding, right?

The taxi driver who used debt to buy Bitcoin is an urban myth, but the multi-millionaire pizza guy who accepted Bitcoin is real?
 
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