Crypto Capital Gains Could Be Costly
Hey Jessavers
Governments have spent big on lockdown measures all over the world, and they've borrowed big to keep it going. We have not created this much money in a short period of time since World War 2. $4.1 trillion was spent on World War 2, over a 6 year period when adjusted for inflation that's around 60 Trillion USD.
The damage of these past 2 years will still need to be calculated, but if we look at the 6 or so Trillion the US has created, you can imagine the world's governments are getting closer to that 60 trillion range which would be on par with the spending of World War 2, in a shorter period of time.
If we consider how much governments are spending, you can imagine they'll be looking at ways to cover those debts. While many countries have reached a point where the debt can't be paid, they will still try.
President Joe Biden is expected to raise long-term capital gains tax for the wealthiest Americans to 43.4%, including a surtax. That would be higher than the top federal tax rate on wage income.
Now it's always politically palatable to validity the rich, but what comes for one class tends to come for all of us in the end.
Tax them, not me
If there's one thing I've learned about tax narrative, people are always willing to advocate a tax on anyone but themselves.
- Tax the richer; they have more than enough as it is
- Tax the poor; they need to pay their fair share
Governments have put all income classes at loggerheads and get them to encourage funding the government through the confiscation of assets and income.
If we look at the rates people are expected to take, you can imagine wealthy individuals will either not cash out of assets, leverage loan markets and rack up debt to write off against tax burdens and avoid these tax implications, which will then fall on the middle-class asset holders who don't have these luxuries.
US Leads who will follow
The US has always been known as one of those investment-friendly governments, it might not seem like it, but relative to the rest of the world, the US is pretty business and financial market-friendly. If they are looking at tax rates of 42%, you can be sure that other countries, especially around Europe, will follow the lead.
I don't think any country has really come out of the lockdowns unscathed, so you can imagine the motivations of governments to encroach on your earning potential and savings.
If you were one of those, who are able to come out of the lockdowns unscathed by the job losses and inflation, now you're going to be hit by taxes.
Crypto holders are a soft target
Crypto is an emerging asset class with ALOT of upside potential, and many crypto investors get in with the idea of getting out and being fiat wealthy. This makes you a soft target for these new tax implications. If you are cashing out into fiat, remember, it's their money, so you have to play by their rules.
If you are going to make profits, make sure you factor in the tax rates and ensure that there is a worthwhile profit you're cashing out. Just remember, when taking profits, you'll pay mining fees, exchange fees, slippage, fiat exchange fees and then 20-40% will be taxed depending on your country.
Have your say
What do you good people of HIVE think?
So have at it, my Jessies! If you don't have something to comment, "I am a Jessie."
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The craziest thing is that the gains aren't only calculated when you convert it back to fiat at least for the US.
It’s just going to force the smart ones to borrow more against their assets abd the dumb ones who Want cash for some reason will pay in taxes and inflation! T
It’s like they want to supercharge Bitcoin adoption
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That's why I'm just never going to sell and borrow against crypto with various lending apps out there if I need to get some cash. The regs around going to exchange crypto for crypto/fiat means you're just getting taxed every which way so trying to minimise transactions is key. Still need to speak to my accountant mate about the implications of borrowing against crypto in the UK and clarify that but it makes the most sense to borrow rather than cash out to something that is losing purchasing power anyway!
So what I’m looking at is taking out my principe so how can you tax me if I break even?
Then taking out the max amount that’s tax free about $4500 then it’s like I never spent anything and back to square one plus a little walking around money if I want to!
The rest goes into Sats to get interest I prefer getting 4% on something that goes up 200% a year then get 10% on something that goes down by 5-10% a year
Profit taking is about that taking profits not taking money that you have to owe someone else!
Don’t be greedy and live off your fiat you earn!
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Yes taking out principal is a good approach but not sure how it works as each tax year is different. You might only be able to take your principal amount tax free if that's what you spent in that tax year.
E.g. Last tax year, spent $5000 on crypto but didn't take anything out. This tax year, withdrew that $5k but you're $500 over the limit? Was it crypto-crypto too (includes stablecoins)? Would be worth checking to make sure you don't get hit.
Also, in the UK at least, you can count previous year losses towards your gain amount so you can have a higher gain this tax year. Might be the same for you but not sure how South Africa tax laws are.
Otherwise playing with house money is always fun
Also, crypto earnings come into effect here in the UK too so we get the double whammy income and cap gains!
Yeah I don;t mean ALL iv invested over the years, just what I've put in this year plus the tax free rate, I think that's a fair amount. The rest become sats and that's that.
Trying to keep my trades to a minimum. I also don't get the whole trading crypto for crypto as a tax event because when you trading crypto for crypto the fiat price is the same at the time, but the individual unit price is differing
It just seems like a stupid idea that wasn't well thought out, if I trade 1 eth for x amount of sats whats that got to do with the fiat value.
I don't give a fuck about the fiat value, I give a fuck that someone wants to give me more Sats than previously for an ETH
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Ah yeah OK you should be alright then. To be fair, that does sound like a solid plan. I've taken some losses in previous years so have a bit more to work with on the allowance here.
I hear you mate. Biggest crock that you have a fiat tax to pay when you don't even move in and out of fiat but between two different cryptocurrencies... Portugal? Lol
#hodl
Capital gains will definitely be costly as all the economies struggle to pay off all the extra spending they did. I don't foresee it going well and honestly, I don't think the economy will ever be what it is in the past. All the lockdowns plus the money going to the politicians friends just means more of the middle class and businesses got wiped out.
The only thing I am worried about is if they put in unrealized capital gains taxes as that would be devastating even for the HODLers if your on a centralized exchange.
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I am keen to see if they go after crypto because if unrealised gains are applied to other assets like homes and stocks you'll end up liquidating holders and taking the markets which is something they can scarce afford.
Crypto is still a small asset class but its the only one providing yields that could help underfunded pensions and that's why they are pushing for ETFs. I don't discount that they could still try it but the negative effects will be more than the amount of cash they can pull out of holders
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Yea but I feel like they will attempt it because they want to prop up the old system. They might start liquidating slowly and take people out. However if it can get people to rely on the government, then the backlash might be worth it in their minds.
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This is very compelling reason to not convert your crypto to Fiat and wait for the time when more companies will start accepting crypto as mean of purchase. There are 2 benefits - no hassle of converting to Fiat and loosing value to tax and other things is that you done have to worry about the price fluctuations as well and it dos not matter what’s cryptos value in Fiat and you are paying in crypto only.
Indeed, I think it all depends on the amounts you have sure, if you have a massive amount to convert you may not care about the tax as it will be life-changing money regardless. To others it may be so small that tax isn't that much of an issue,
But for me who is trying to build up savings I don't see the point in trying to catch market movements, sure I'll take a limited amount of profits but not going to be greedy my goal each year is to ALWAYS have more Bitcoin than I had the previous year
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This is all very real to me right now. I just did a conversion so that I could pay off some bills. Luckily my brother in law is an accountant who also dabbles in crypto, so he was my first call just to make sure we have a plan on how to deal with the taxes when the time arrives. I think we have a pretty solid plan in place at this point and when I take more out it will be enough to cover all of my expenses plus taxes. I agree with you about people always wanting the rich to be taxed. They just don't realize that eventually that all trickles back down to them anyway!
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The way I see it whenever you move to fiat you HAVE to play by their rules, it's their money and it's only fair, you can't get the benefits of fiat without the downfalls too. So for me, I only use as much fiat as I need for things like bills and living expenses other than that I'm pretty invested.
I do keep cash for emergencies and for dry powder for good opportunities too, but not much.
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Yeah, in this case it was necessary for me to move it like that. We keep some cash on hand too just in case we need it. Perhaps eventually those instances where fiat is necessary will become more scarce!
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