US Fiscal Tax Code is about to undergo significant changes. The Senate has issued a nearly 500-page decree with legal changes. It is quite possible that this may also affect the taxation of crypto wheels.
The bill does not explicitly mention the trade in cryptocurrency and its taxation. However, according to the comments below, it is likely that the new laws will also affect the taxation of cryptocurrency trading.
The biggest impact on crypto currency transactions could be the replacement of “like-child exchanges” with the first-in, first-out. The “like-child exchanges” has allowed traders to save taxes so far. Because the law provides that you can replace capital or assets with similar value carriers without having to pay taxes for the sale or replacement.
For example, if traders made a profit by holding Bitcoin, they could buy ether from it without being prosecuted for the Bitcoin gain. This allowed traders of crypto currencies to effectively circumvent the taxation of long-term gains so far and only had to tax short-term profits.
However, the law planned for next year now only allows this regulation to be accepted for real estate transactions. In the stock market and probably also on the crypto market then the principle of “first-in, first-out” comes into force.
“First-in, first-out” and the taxation of cryptos
The draft law seeks to apply the “first-in, first-out” principle for “specified securities”. The authorities assume that the respective goods, commodities or securities which have been purchased first are also issued or sold first. So in the case of emerging questions about the taxation of cryptocurrencies, the difference between the first purchased coin and the current price would always count.
For example, if you buy a Bitcoin today for just under $ 17,000 and a few weeks for $ 20,000, and later decide to sell one for $ 37,000, you’ll have to sell the one you bought for $ 17,000. You would then have to pay taxes for the difference of $ 20,000.
However, since this principle so far refers to the (at least with regard to cryptocurrencies) unspecified securities, we are here on speculative ground. A more precise definition of the tax authority is still pending. At the moment, Bitcoin is still classified as Commodity by the US Commodities Futures Trading Commission.
It remains to be seen, then, until the law is finally waved and if further definitions follow. However, as the mainstream adaptation of cryptocurrencies progresses day by day, it is likely to be classified soon.
If the unfavorable case for US traders arises that higher taxation is incurred, any tax loopholes are inevitable. For example, switching between different wallets might have an impact on the date of receipt of the coins. In any case, more precise definitions are still pending. The situation for the taxation of cryptocurrencies in Germany seems (at least somewhat) clearer in this context.
Taxation of cryptos in Germany
In Germany , transactions with crypto currencies are currently still subject to the rules of “speculative transactions” within the meaning of section 23 (1) no. 2 of the Income Tax Act. Since they are not officially recognized as a means of payment, they are classified as “ordinary intangible assets”. These are then not “paid” – rather, it is a sale transaction.
Temporal distances also play a role here. There is an exemption limit of 600 euros profit per year, which is not taxed. So if you buy a coin for 11000 euros and sold again for 11600, that is tax problem. This rule applies if the gap between purchase and sale does not exceed one year. But beware: The exemption limit counts for all transactions throughout the year, not just for a transaction.
However, if the period between purchase and sale is longer than a year, this rule does not apply. Then you do not have to pay taxes.
In all other cases, the ordinary income tax rate applies.
Cryptocurrencies and the minimum duration
However, the minimum holding period of one year does not apply to commercial use – as with companies or self-employed. Depending on the individual case, profits may be subject to income, corporate and / or trade tax. Here, therefore, a clear distinction must be made on a case-by-case basis.
In both Germany and the US, the situation for cryptocurrencies is not entirely clear. In both cases it shows once again that one tries to answer new technological questions with old ways of thinking.
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