So you Invested in some Bitcoin this year and made some sweet, sweet Fiat? Maybe you traded your Bitcoin, to Etherium. Then maybe you traded your Etherium for some Bitcoin and some Ripple. What are you taxed on? I hope to answer these questions.Selling for FiatSo the first way that you'll owe GAINS TAX is if you sold bitcoin for money, at a profit! It does NOT matter when you bought the Crypto. It only matters that you sold it in the last year. So if you bought a bitcoin 1 month ago for 8k. And sold today at 13k. You NEED to report a $5,000 on your taxable gains.Trading for Other CryptoThe other scenerio when you need to report is when you trade for other other currencies. When a trade commences it is treated as you selling and then buying whatever your trading for. So if you bought bitcoin 1 month ago at 8k. And traded it to BCash today while bitcoin was 13k. It is treated that you sold the bitcoin at that price and you need to report the 5k.This might sound unfair, however the same method is used for trading rare materials (Gold, Silver), Stocks, other fiat currencies, and any other property type investments.Multiple Buys and Sells or trades...Note: If you bought Bitcoin at $8k, Sold at 13K Bought at $19k, Sold at $12K... You made $5k, then Lost $7k. So your capital gains is -$2k. You pay the total of all your transactions.Short Term Vs Long TermThis is short, but if you sold (or traded) crypto-currencies that you've hedl for over 1 year that is considered a Long Term Investment. If it comes out as a negative you can carry those loses for 7 years. You can not carry loses from short term investments (Bought and sold(traded) in less than 365 days).So if you bought bitcoin 2 years ago for $20,000 (You got scammed?) and sold last month for $8k, you have a long term lose of $12,000. This $12,000 lose can be added to your income next year so your gains are less. (They carry over for 7 years).MiningFor miners, Mining income is treated as self-employed income, NOT capital gains tax. When a coin is mined you report the income from the worth of the coin from when it was mined. So if you mined 1 btc (Good job...) 1 month ago at $8k. You'll report $8k under self-employed income. Say you sold that bitcoin you mined last month today for 13k. You will need to report both the 8k income, and the 5k capital gains. (These are taxed at different rates depending on your income...) Expenses are not included in the cost bases. So you WON'T subtract $100 from the 8k. However you can add any expense at the end of the year if you operate your mining operations like a LLC or somthing!Final ThoughtsFrom my research (Professional accountant, amateur crypto-dude) these are the cases of taxable transactions. If you want Crypto-currency to be taken seriously, you need to treat it like a serious currency, which is taxable. There are ways to reduce your taxes, but I'm not going to outline them, since some of them are grey areas. Also, if you haven't been actively trying to reduce taxes until now... It's too late for 2017.Be smart. Hire a professional to assist you if you've made massive gains. It's better to pay a tax professional .05 btc than to lose all your bitcoin because you technically laundered money because of your ignorance. (That doesn't hold up in court).DisclaimerI'm just some guy typing this at my in-laws house over holiday break. Gone half crazy after spending time with them. While I am a professional accountant, I'm also a random redditor on the internet. Do your own research, or hire someone to do all this for you. I'M NOT RESPONSIBLE! Hopefully that gets the SEC and IRS off my back...Edit: Missed one...Making a PurchaseWhen you buy something! Oh boy! So you treat this as gains from the purchase price of your coin to the sell price of your coin. So if you bought 1 btc for $8k. And you bought a new car for $8k today when BTC was worth $13k. You would pay the gains tax on what you "Sold" to buy that car. This gets complicated so I'll try to format it the best I can...You sold $8,000 worth of the bitcoin that is worth 13K. So 8/13 or .615%. Without going into FIFO or FILO options... We'll consider FIFO (Don't worry about terminology, just giving it incase YOU want to go look it up!)You'll need to take .615% of your original investment to get your cost basis. $8k * .615 = $4,920.$4,920 is the amount you'll consider that is your original investment, and you sold for 8k. So your capital gains is $8k - 4,920 = $3,080 <---- This is your taxable gains. THIS IS A TAXABLE EVENT! In regards to transaction fees... Technically The fee is part of the sale, so add that to the total of what was spent.There's a bill that is currently being looked at that will make any purchase under $600 non taxable. Until this is passed any purchase is taxable! via /r/Bitcoin http://bit.ly/2Ckpy6n
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