Daily Trading tax question

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Archived
Joined
Jan 2018
From
USA
Hello Everybody,
Happy to join the forum!

I have a question which I still struggle to comprehend. I joined crypto in December. I invested a X amount of dollars. I bought ethereum, which will be traded for altcoins. I intend to hold those altcoins long term. At the same time, portion of my ETH will be dedicated to daily trading, so earnings help improve stake at the long term investments. Options for daily trading are to either trade ETH for altcoins or ETH-USD-ETH. It does fluctuate by $80-120 a day, so it's a decent sum to reinvest into alts. Which approach is preferable tax wise? Am I right in assuming that, say I make $10k in 2018, which I subsequently reinvest in alts, I will end up paying around $2k taxes, although I wouldn't have cashed out anything per se? I believe it should be safer to stick to crypto pairs, yet playing off of ETH-USD bounces looks simpler.

Thanks a lot in advance!
 
Joined
Dec 2017
From
Belfast n. Ireland
i have not even thought about tax i dont know if we have to pay tax in the uk we dont pay tax like you do we pay tax on every item we buy the shop adds it on same as in work the company takes some of your wages for tax, is there a tax law in the uk ,anyone?
 

V4Vendetta

Moderator
Joined
Apr 2017
From
Texas
Hello Everybody,
Happy to join the forum!

I have a question which I still struggle to comprehend. I joined crypto in December. I invested a X amount of dollars. I bought ethereum, which will be traded for altcoins. I intend to hold those altcoins long term. At the same time, portion of my ETH will be dedicated to daily trading, so earnings help improve stake at the long term investments. Options for daily trading are to either trade ETH for altcoins or ETH-USD-ETH. It does fluctuate by $80-120 a day, so it's a decent sum to reinvest into alts. Which approach is preferable tax wise? Am I right in assuming that, say I make $10k in 2018, which I subsequently reinvest in alts, I will end up paying around $2k taxes, although I wouldn't have cashed out anything per se? I believe it should be safer to stick to crypto pairs, yet playing off of ETH-USD bounces looks simpler.

Thanks a lot in advance!
**Disclaimer** I am not a tax professional, and this is not tax or financial advise. I would recommend consulting a crypto tax professional for more specific clarification.*** But with that said, from my research, anytime you sell any crypto back to USD (or other fiat-each country may differ) it is considered a taxable event, which means you would need to keep records of your buy in points and sell out points for tax records. The new GOP tax bill has allegedly removed a 'like-kind' exemption that supposedly applied to trading crypto to crypto. However, the IRS has yet to clarify how it will treat this, and there is no specific case law I am aware of that deals with this. But one thing to remember is that most of what you report on your taxes is voluntary. It's only if something should go wrong or a red flag is triggered somewhere that you may face auditing. My option: Since the IRS has not specifically clarified its position on how to deal with crypto (excluding their earlier position that they will treat it like "property" subject to capital gains/loss taxation), unless you sell back to USD, how would they know what trading you've actually done in the interim? Unless you volunteer than information how would they know or find out? If you're trading in millions of dollars they might take a greater interest in you, but most people don't have that kind of money coming in and out of crypto. Additionally, since they haven't clarified any specifics or released specific law on how to deal with such trading or transactions, it may be impetuous to give them more information about your trading activities than is legally required, especially when the entire point of said trading activities are supposed to be anonymous. What's the point of crypto if we're all rushing out giving our private transaction data to a government with a history of having data under their supervision exposed, hacked or compromised? I leave it to the individual to answer those questions for themselves, but as for me, I won't do more than I am legally obligated to do. So until the IRS actually clarifies with specificity how they will treat the taxation of crypto as a whole, I would refer to what is in place which is capital gain/loss when crypto is sold back to fiat.
 

V4Vendetta

Moderator
Joined
Apr 2017
From
Texas
i have not even thought about tax i dont know if we have to pay tax in the uk we dont pay tax like you do we pay tax on every item we buy the shop adds it on same as in work the company takes some of your wages for tax, is there a tax law in the uk ,anyone?
Not sure how the UK treats crypto taxation but found this online, you can check it out. https://cryptotax.uk/guide/
 
Joined
Jan 2018
From
USA
**Disclaimer** I am not a tax professional, and this is not tax or financial advise. I would recommend consulting a crypto tax professional for more specific clarification.*** But with that said, from my research, anytime you sell any crypto back to USD (or other fiat-each country may differ) it is considered a taxable event, which means you would need to keep records of your buy in points and sell out points for tax records. The new GOP tax bill has allegedly removed a 'like-kind' exemption that supposedly applied to trading crypto to crypto. However, the IRS has yet to clarify how it will treat this, and there is no specific case law I am aware of that deals with this. But one thing to remember is that most of what you report on your taxes is voluntary. It's only if something should go wrong or a red flag is triggered somewhere that you may face auditing. My option: Since the IRS has not specifically clarified its position on how to deal with crypto (excluding their earlier position that they will treat it like "property" subject to capital gains/loss taxation), unless you sell back to USD, how would they know what trading you've actually done in the interim? Unless you volunteer than information how would they know or find out? If you're trading in millions of dollars they might take a greater interest in you, but most people don't have that kind of money coming in and out of crypto. Additionally, since they haven't clarified any specifics or released specific law on how to deal with such trading or transactions, it may be impetuous to give them more information about your trading activities than is legally required, especially when the entire point of said trading activities are supposed to be anonymous. What's the point of crypto if we're all rushing out giving our private transaction data to a government with a history of having data under their supervision exposed, hacked or compromised? I leave it to the individual to answer those questions for themselves, but as for me, I won't do more than I am legally obligated to do. So until the IRS actually clarifies with specificity how they will treat the taxation of crypto as a whole, I would refer to what is in place which is capital gain/loss when crypto is sold back to fiat.

Thanks a lot man, I can't agree more! I came to the same conclusion. Question though - if I make profit, say I start off with $1000, buy 1 ETH, it bumps up to $1300, I sell for USD, then it dips, I buy again etc. - if I keep these gains WITHIN the Exchange in order to buy more ETH, then improve stake at the long term altcoins, do you reckon I should report those as well? Is that considered a cash out? Technically, I am reinvesting all of it, and its value is subjective and highly volatile.
 

V4Vendetta

Moderator
Joined
Apr 2017
From
Texas
Thanks a lot man, I can't agree more! I came to the same conclusion. Question though - if I make profit, say I start off with $1000, buy 1 ETH, it bumps up to $1300, I sell for USD, then it dips, I buy again etc. - if I keep these gains WITHIN the Exchange in order to buy more ETH, then improve stake at the long term altcoins, do you reckon I should report those as well? Is that considered a cash out? Technically, I am reinvesting all of it, and its value is subjective and highly volatile.
Totally up to you to determine that but my contention is this: since they want a but in amount and price for crypto followed by a sell amount and price, this would determine your capital gains. If you’re up in ETH how would they know unless you sell more than you bought? It’s best to keep everything in crypto anyway. One you won’t be taxed and two you’re stocking up on the money of the future.
 
Joined
Jan 2018
From
USA
Indeed, which sort of answers my next question which would've been whether one would gain more ETH by trading through alts or ETH-USD-ETH?
 

V4Vendetta

Moderator
Joined
Apr 2017
From
Texas
Indeed, which sort of answers my next question which would've been whether one would gain more ETH by trading through alts or ETH-USD-ETH?
You can make profit both ways but if you keep it in crypto it shouldn’t be a taxable event, provided the IRS doesn’t come up with a new specific law about it. I have a friend that just swing trades almost everyday between BTC and either LTC or BCH and has more than doubled his BTC position. It’s a gamble, sometimes you lose but you can generally win more than you lose.
 
Joined
Jan 2018
From
USA
You can make profit both ways but if you keep it in crypto it shouldn’t be a taxable event, provided the IRS doesn’t come up with a new specific law about it. I have a friend that just swing trades almost everyday between BTC and either LTC or BCH and has more than doubled his BTC position. It’s a gamble, sometimes you lose but you can generally win more than you lose.
Exactly how I anticipate it to be. OK, cool - I can't thank you enough for all the help :)
 
Joined
Dec 2017
From
UK
Not sure how the UK treats crypto taxation but found this online, you can check it out. https://cryptotax.uk/guide/

I'm in the UK and self-employed. The information on that page is pretty accurate. The only difference I've been told is that the investment (like buying physical silver through the business) is to be accounted for as an asset for corporate tax purposes. My accountant has said the money going in is taxable as profit is used to buy them, profit on sells is only applicable once it's sold, i.e. once the profit is realised beyond it's virtual amount on the exchange.

If it's personal money invested then yes, detail it out on your tax return but make sure you account for any charges and losses incurred. Tax is only on the gain. You're literally just classing any gain as income, so if it's above your tax-free allowance you pay tax on it along the usual sliding scale. I get the impression the UK laws are a quite straightforward compared to the US.

I have an Excel workbook I keep for this. I'll clean it down and post it here when I get home. It's nothing fancy but might be useful for tracking buys/sells/swaps.

Cy
 

V4Vendetta

Moderator
Joined
Apr 2017
From
Texas
I'm in the UK and self-employed. The information on that page is pretty accurate. The only difference I've been told is that the investment (like buying physical silver through the business) is to be accounted for as an asset for corporate tax purposes. My accountant has said the money going in is taxable as profit is used to buy them, profit on sells is only applicable once it's sold, i.e. once the profit is realised beyond it's virtual amount on the exchange.

If it's personal money invested then yes, detail it out on your tax return but make sure you account for any charges and losses incurred. Tax is only on the gain. You're literally just classing any gain as income, so if it's above your tax-free allowance you pay tax on it along the usual sliding scale. I get the impression the UK laws are a quite straightforward compared to the US.

I have an Excel workbook I keep for this. I'll clean it down and post it here when I get home. It's nothing fancy but might be useful for tracking buys/sells/swaps.

Cy
Wouldn’t it be nice if we could just keep 100% of our labor and decide what we want to support with it?
 
Joined
Mar 2018
From
harrow
Not sure how the UK treats crypto taxation but found this online, you can check it out. https://cryptotax.uk/guide/

Bitcoin is a new system of payments and the world's first decentralized digital currency, also called "cryptocurrency". The introduction of crypto currencies like Bitcoin is an innovative and developing area and their legal and regulatory status has not yet been established.
Bitcoin tax uk
 
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