when is it time to sell your crypto?
Ethereum is currently at an all-time high, around USD 4,600 per coin, and other cryptocurrencies like Bitcoin are back within their highest range of USD 62,000 per coin. As an owner of these coins, you may be wondering if it is time to sell your coins and turn them into fiat money. When turning the coins into cash, there are many variables to consider; it is often beneficial to gain a financial professional’s advice to help understand complex decisions regarding tax liability and long-term investment planning.
Investment Goals
Each cryptocurrency owner has different goals in mind when they decide to invest. Younger investors could be considering long-term financial gain, holding their crypto for decades to come. Older investors are often more short-term oriented, looking to make significant gains over shorter periods. Additionally, investors may be using cryptocurrency within the operation of their business. In this case, it is essential to have ample cryptocurrency available and consider when the market persuades owners to buy more crypto when the price is reasonable.
Tax Implications in the United States
One crucial factor to consider when looking at your crypto portfolio and exit strategy is the taxation implications. In the United States, cryptocurrencies are treated as property for federal income tax purposes. Specifically, the distinction between “long-term” and “short-term” Capital Gains is crucial. Once you hold much crypto for over one year, you are privileged to preferential rates of taxation ranging from 0% to 20% based on your income. If you sell many cryptocurrencies before one year of holding, the gains will be taxed as traditional income.
Read more about long term capital gains from the United States Internal Revenue Service, here.
Tax Implications in Israel
In Israel, the Israeli Tax Authority defines cryptocurrency as a “non-currency,” and with that designation comes a unique tax structure. Specifically, the Israeli Tax Authority imposes a 25% tax on gains. Additionally, suppose there are significant amounts of cryptocurrency transactions within a specific company, and it reaches a certain threshold. In that case, it could be defined as a crypto transaction as a business, which could be taxed up to 53%.
Currently, all disclosers of crypto transactions are through a disclosure system. However, the ITA is known to audit taxpayer’s social media accounts and receive information from exchanges to get a clearer picture of their cryptocurrency taxation revenue potential.
Future Prospects of Cryptocurrency
While the exact future of crypto and its value is certainly unknown, various experts are making claims on what they think the future value of certain cryptocurrencies will be like in the short term. In a Forbes.com interview, Crypto analysts predict that bitcoin will end at over USD 80,000 per coin by the end of 2021. Read the full article, here
Talk to a Crypto Taxation Professional
At Nimrod Yaron & Co., we serve as a professional resource for individuals and companies invested in cryptocurrency. We are specifically assisting with intelligent cryptoasset tax planning. Contact us today to learn about all of the services we offer.
