Cryptocurrencies have been a popular investment choice for many people in recent years, but the regulatory landscape has not always been clear. The IRS has released guidance on how cryptocurrencies are taxed, and this blog post will explore what this means for investors.

In 2014, the IRS issued its first guidance on the taxation of cryptocurrencies. This guidance classified cryptocurrencies as property, which means that they are subject to capital gains tax when they are sold or exchanged for other property. This means that investors must calculate and report their capital gains or losses on their tax returns.

The IRS updated its guidance in 2019, providing further clarification on how to calculate and report capital gains on cryptocurrency transactions. The updated guidance requires investors to calculate their capital gains or losses using the cost basis of the cryptocurrency. This means that investors must keep track of the original purchase price of the cryptocurrency, as well as any fees associated with the purchase or sale.

In addition to capital gains tax, investors must also report any income earned from mining or staking cryptocurrency. The IRS considers this income to be taxable, and it must be reported as either ordinary income or self-employment income.

The IRS guidance on cryptocurrencies is important for investors because failure to comply with the tax laws could result in penalties, fines, or legal action. It's important to understand the tax implications of cryptocurrency transactions and to comply with local tax laws.

The IRS guidance also provides clarity on how to calculate and report capital gains on cryptocurrency transactions. This can be helpful for investors who are unsure of how to calculate their tax liability.

To comply with the IRS guidance for cryptocurrencies, investors must keep accurate records of all cryptocurrency transactions, including purchases, sales, and trades. It's important to calculate the capital gains or losses from each transaction and report them on your tax return.

There are a number of tools and services available to help investors track their cryptocurrency transactions and calculate their tax liability. These tools can be particularly useful for investors who trade frequently or hold a large portfolio of cryptocurrencies.

The IRS guidance for cryptocurrencies provides clarity on how cryptocurrencies are taxed. It's important for investors to understand the tax implications of cryptocurrency transactions and to comply with local tax laws. By keeping accurate records and using the right tools and services, investors can minimize their tax liability and stay on the right side of the law.

We at Descrypt, have the most accurate crypto assets tracker which is critical to compute capital gains. What’s more, it is absolutely free to get started!