News – 02.12.24
2024 US tax year end planning for Americans in the UK
The 2023 US tax year ends on 31 December 2023, so now is a good time to consider whether there is anything that you can do to minimise your US tax exposure for 2023 and begin preparing for 2024. … Read more
Insight – 02.12.24
Budget 2024: Reform to the taxation of carried interest
Find out more about the changes coming for capital gains tax and carried interest. … Read more
Upcoming event – 10.12.24
Funding innovation in the technology sector: Are the government doing enough?
Join us for an exclusive roundtable breakfast to explore the question of whether the government are doing enough to support innovation in the technology sector. … Read more
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As a US taxpayer, you’re required to report gains and losses on crypto asset sales on your US tax return, just as you would a capital gain or loss. This is because the IRS views crypto assets as property, as opposed to currency. The term “crypto assets” covers a broad range of different types of currencies and tokens. There are the more common assets such as Bitcoin or Ethereum, but there are thousands of other smaller currencies too.
There are many different ways that a taxable event could arise in the crypto asset space, but some example events include;
For example, if you purchase a coffee with crypto, the fair market value of the crypto must be converted to US dollars and treated as a disposition on your US tax return. If you are paid in crypto you must convert the crypto received into US dollars and report the payment on your US tax return. There would also be a second tax point at the time the crypto is later sold or exchanged.
The proceeds of a crypto sale must be converted to US dollars on the exchange at the time of sale. Similarly, the cost also has to be converted to US dollars at the time of purchase. Due to the high volume of trades and high fluctuation of crypto values (even minute to minute), the calculations can be complicated. We therefore advise our clients to keep good records of transactions - some crypto wallets provide better information than others.
The same “short term” or “long term” treatment applies to the capital gains tax treatments as would do to a normal capital asset. As a lot of crypto assets are bought and sold in quick succession, this would lead to their gains being taxed at ordinary income rates as opposed to the lower long term capital gains tax rates. The current administration is proposing to tighten the wash sale rules, meaning the availability to harvest losses will reduce.
For many crypto holders there is confusion around what has to be reported on their tax return. Some crypto exchanges have begun to issue a tax form known as the 1099-K – but this only reports the total value of transactions and does not factor the “cost basis,” which makes it hard to calculate the taxable gain.
Our US/UK clients also have to consider the UK tax implications at the sale or receipt of crypto. In this situation, we would apply the US-UK tax Treaty to prevent double taxation and determine which country has the primary taxing right.
You might also be interested in: Cryptocurrency. The need to knows.
As a US taxpayer, you’re required to report gains and losses on crypto asset sales on your US tax return, just as you would a capital gain or loss. This is because the IRS views crypto assets as property, as opposed to currency. The term “crypto assets” covers a broad range of different types of currencies and tokens. There are the more common assets such as Bitcoin or Ethereum, but there are thousands of other smaller currencies too.
There are many different ways that a taxable event could arise in the crypto asset space, but some example events include;
For example, if you purchase a coffee with crypto, the fair market value of the crypto must be converted to US dollars and treated as a disposition on your US tax return. If you are paid in crypto you must convert the crypto received into US dollars and report the payment on your US tax return. There would also be a second tax point at the time the crypto is later sold or exchanged.
The proceeds of a crypto sale must be converted to US dollars on the exchange at the time of sale. Similarly, the cost also has to be converted to US dollars at the time of purchase. Due to the high volume of trades and high fluctuation of crypto values (even minute to minute), the calculations can be complicated. We therefore advise our clients to keep good records of transactions - some crypto wallets provide better information than others.
The same “short term” or “long term” treatment applies to the capital gains tax treatments as would do to a normal capital asset. As a lot of crypto assets are bought and sold in quick succession, this would lead to their gains being taxed at ordinary income rates as opposed to the lower long term capital gains tax rates. The current administration is proposing to tighten the wash sale rules, meaning the availability to harvest losses will reduce.
For many crypto holders there is confusion around what has to be reported on their tax return. Some crypto exchanges have begun to issue a tax form known as the 1099-K – but this only reports the total value of transactions and does not factor the “cost basis,” which makes it hard to calculate the taxable gain.
Our US/UK clients also have to consider the UK tax implications at the sale or receipt of crypto. In this situation, we would apply the US-UK tax Treaty to prevent double taxation and determine which country has the primary taxing right.
You might also be interested in: Cryptocurrency. The need to knows.
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