Bitcoin and taxes: what to know if you traded cryptocurrency in 2021

The video explains how the IRS treats cryptocurrencies like Bitcoin and Ether as capital assets, similar to stocks or bonds. It covers the tax implications of buying, selling, and using crypto, emphasizing the need to report transactions on tax returns. The video also details how to calculate taxes based on the duration of ownership and the value change of the crypto. Additionally, it highlights the importance of keeping detailed records and understanding the IRS's increasing focus on crypto transactions.

How does the IRS classify cryptocurrencies for tax purposes?

• As commodities

• As collectibles

• As capital assets

• As foreign currency

What determines the tax rate on gains from selling crypto?

• The duration of ownership

• The exchange used

• The amount of gain

• The type of cryptocurrency

If you sell crypto for less than you bought it, what is the tax implication?

• You owe a penalty for the loss

• You must report it as income

• You owe no taxes and may reduce your overall tax burden

• You owe taxes on the loss

What is required if you receive crypto as payment for services?

• Pay taxes as if paid in U.S. dollars

• Only report if over $600

• Report as a gift

• No tax is required

Why is it important to keep detailed records of crypto transactions?

• To increase the value of crypto

• To share with other investors

• To ensure accurate tax calculations and avoid penalties

• To avoid paying any taxes