Why the Taxman is the Real Crypto Winner! 💸

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Tax. Ugh, just the word makes you want to roll your eyes, right? But guess what? You can’t just ignore it. It’s like that one friend who shows up uninvited to every party. You know, the one who always wants to talk about taxes? Yeah, that guy.

So, Bitcoin (BTC) hit a whopping $100,000 for the first time in December 2024. I mean, who didn’t see that coming? You probably had a few “I told you so” moments with your crypto-skeptic friends over the holidays. But now, it’s time to get your act together and pay attention to the tax implications if you’re thinking about cashing in on those sweet profits. Because let’s face it, the taxman is lurking like a bad smell.

Long-term Bitcoin holders are raking it in — and guess what? The taxman is watching. With the average long-term holder having forked out around $24,543 for their Bitcoin, many are now sitting on profits that are nearly four times that amount. It’s like finding a $20 bill in your winter coat pocket, but way better!

But let’s not kid ourselves here. Tax authorities are getting sharper than a tack. The days of thinking your crypto profits are flying under the radar? Gone. Poof! Whether you like it or not, the taxman is catching up, and he’s not just sitting there twiddling his thumbs.

Take the IRS, for example. They’ve introduced a new rule that says investors must use wallet-based cost tracking for crypto assets starting in 2025. Great, right? Just what we needed — more paperwork! Previously, you could group all your assets together like a happy family reunion. But now? Each wallet is its own separate ledger. It’s like being told you can’t sit with your friends at lunch anymore. Thanks, IRS!

And let’s talk about Koinly, the crypto tax software platform that’s scrambling to keep up with these changes. They’ve had to make updates faster than you can say “tax evasion.” One of their updates allows users to adjust their cost-basis settings from a certain date without messing up previous tax calculations. Because who doesn’t love a little chaos in their financial life?

And don’t think this is just a U.S. problem. Other countries might follow suit. Australia, the UK, Ireland — they’re all watching and waiting. It’s like a game of tax chicken, and nobody wants to be the one to flinch first. Sure, they haven’t introduced anything like this yet, but it’s only a matter of time. Just look at how Germany and Malta are already taxing short-term gains while letting long-term gains slide. It’s like a tax buffet, and everyone’s trying to get their fill!

So, as crypto continues to grow and gain traction worldwide, keeping up with tax laws is becoming more crucial than ever. Over the next couple of years, expect a lot of changes in how governments handle crypto taxes. It’s going to be a wild ride, folks!

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

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2025-01-22 18:33