Cryptocurrency-Savvy-Tax-Pros-Fulfill-a-Niche-Need

If you’ve been tracking the rise (and fall) of Bitcoin since before it began being publicly traded, you’re not alone: far from a flash in the pan, this decentralized cryptocurrency has gained a dedicated and expanding group of followers. And with more cryptocurrencies being created each day, this trend toward using and investing in alternative currencies is likely to grow even stronger in the coming years.

However, few accounting professionals are well-versed in the structure and treatment of cryptocurrencies. This can leave clients unsure as to whether they’re correctly reporting the profits (or losses) they’ve incurred or how they can structure their transactions most efficiently.

Read on to learn more about how U.S. tax laws treat cryptocurrency profits and why accountants who stay updated in this developing area have rapidly expanded their customer base.

How are Cryptocurrency Profits and Losses Taxed?

Under federal tax law, cryptocurrencies are considered commodities or property, not currency. This means that capital gains taxes must be paid on all cryptocurrency transactions, even if an investor is simply switching one type of cryptocurrency for another (for example, selling Bitcoin and using the proceeds to purchase an equivalent amount of Litecoin).

While this presents limited opportunity to shield these transactions from taxation, there are still some advantages. By holding cryptocurrency for a year or longer, investors can convert any short-term capital gains to long-term capital gains—both of which, after 2018, are no longer tied to an investor’s ordinary income bracket. Investors can also deduct as capital losses any loss of value they’ve incurred in these volatile investments.  

How Can Tax Professionals Market This Area?

Even if you have no plans to specialize in cryptocurrency taxation, it’s a good idea to stay up-to-date on the federal laws and regulations in this arena. Not only can this ensure you do right by customers who include cryptocurrency among their investment holdings, it can give you a leg up on competitors who haven’t even mastered the basics of Bitcoin transactions.

Want to learn more about Cryptocurrency? Check out our 2018 Freelance and Cryptocurrency Rules course. 

Source

https://www.forbes.com/sites/theyec/2018/05/14/tax-considerations-for-business-owners-in-the-cryptocurrency-space/#265612d970e4

https://www.marketwatch.com/story/your-simple-guide-to-the-new-capital-gains-tax-rates-2018-04-16