All the things you wanted to know about Bitcoin and the other cryptocurrencies

Paid In Crypto? Koinly Reveals What Taxes You Owe

0

Have you been getting paid in crypto? Whether it’s Bitcoin, a stablecoin, or any other cryptocurrency, you’ll still need to pay taxes.

Big names, including Odell Beckahm Jr. from the NFL, Golden State Warriors players from the NBA, and even the Mayors of Miami and New York City, opted to receive their salaries in Bitcoin or crypto.

So while getting paid in crypto is pretty straightforward and gaining in popularity, you may not be aware of all the tax implications. Luckily crypto tax platform Koinly is here to break it down.

How is crypto taxed?

Wherever you live, and no matter the cryptocurrency you’re getting paid in – the tax rules are the same. Getting paid in crypto is similar to getting paid in fiat currency (such as USD, GBP, EUR, AUD, or CAD).

In the eyes of the tax office, your salary in crypto is likely viewed as income and, as such, is subject to Income Tax at your regular Income Tax rate. This will be calculated at the fair market value of the cryptocurrency on the day you receive it.

If you’re receiving stablecoins as your salary, this won’t be too hard to calculate, as the total amount of USDC, USDT, DAI (or other stablecoin) is usually pegged 1:1 with the US Dollar.

However, if you’re paid in BTC, ETH or another cryptocurrency, you’ll have to calculate the value of the income on the day you were paid. For example, if you received 0.1 BTC as your monthly salary, this might be worth $2,000. In this scenario, you’ll need to pay Income Tax at your normal Income Tax rate on the $2,000.

What if your crypto’s value changes?

While these calculations may seem simple initially, you’re likely to hold onto the crypto assets beyond the day you’re paid. If you sell, swap, or spend this crypto, you’ll also open yourself up to owing Capital Gains Tax.

Say a few months after you received your 0.1 BTC as income, you notice the price of 0.1 BTC is now $3,000. You decide to sell it for USD. You already owe Income Tax on the $2,000, but now you’ll also owe Capital Gains Tax (CGT) on the $1,000 gain you made.

To calculate how much CGT you’ll owe, subtract your cost basis (the price of the asset on the day you received it + any fees related to disposing of it) from the price you sold the asset for. In this case, $3,000 – $2,000 = $1,000. Hence, you’ll have to pay CGT on $1,000. How you’re taxed on these capital gains will vary by country and how much you earn.

What if the value of your crypto income nosedives?

After the recent price falls across the crypto markets, many people that have had their salary paid in crypto assets may be holding less in fiat value terms than when they were paid. This means you may be able to use tax-loss harvesting, allowing you to claim capital losses by selling your crypto assets that have fallen in value since receiving them.

Koinly can calculate your crypto income taxes

Koinly can help you calculate your crypto income and report it to your local tax office.

Whenever you receive crypto – Koinly calculates the fair market value of your crypto in your chosen currency and on the day you receive it. This lets you keep track of your total earnings throughout the financial year.

About Koinly: Whether it’s Crypto, DeFi or NFTs, Koinly saves you valuable time by reconciling your holdings to generate a compliant tax report in under 20 minutes. Sign up today and see how much you owe!

 

Leave A Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Related Articles