We are switching it up and giving Tax Tips on a Tuesday! For those that dabble in trading Virtual Currency aka Bitcoin, Ethereum, Dogecoin, Luna, etc. this one is for you.
With the recent volatility in the market, you can deduct a maximum of $1,500 ($3,000 for Married filing Jointly) for capital losses. Additionally, any losses over the maximum amount can be carried forward to future tax years to offset income until exhausted.
Some Future Developments for Virtual Currency:
1) The IRS is changing its question related to virtual currency on Form 1040:
2020 Wording: At any time during 2020 did you receive, sell, exchange, or otherwise acquire of any financial interest in virtual currency
VS.
2021 Wording: At any time during 2021 did you receive, sell, exchange, or otherwise dispose of any financial interest in virtual currency
The change from acquire to dispose triggers the possibility that a “taxable event” has occurred. You should be receiving 1099K’s or 1099B’s from Virtual Currency Exchanges with the details of transactions that occurred during the year.
2) As society is transitioning away from cash and more to virtual currency, expect more enforcement from the IRS and information passed to the government in the coming years.
Until next time, don’t hesitate to reach out to your Friendly CPA (Me- Danielle Robinson).
