A new US law and the taxation of crypto currencies

The US tax code is about to undergo extensive changes. The Senate has issued a nearly 500-page decree with legal changes to go there. It is quite possible that this may also affect the taxation of cryptotrades.

The draft law does not explicitly mention the trade in crypto currency and its taxation. According to the following explanations, however, it is likely that the new laws will also affect the taxation of trade in crypto currencies.

Like-Kind Exchanges on the Bitcoin news

The biggest influence on transactions with crypto currencies could be the replacement of “like-kind exchanges” by the “first-in, first-out” procedure. The “like-kind exchanges” have so far enabled traders to save taxes. This is because the Bitcoin news law stipulates that capital or assets can be replaced by similar value carriers without having to pay taxes for the sale or replacement.

If Trader obtained thus bspw. with the holding of Bitcoin profit, they could buy of it Ether, without being able to be prosecuted for the Bitcoin profit. Traders of crypto currencies have thus been able to effectively avoid the taxation of long-term profits and have only had to tax short-term profits.

The law planned for next year, however, now provides for this regulation to be accepted only for real estate transactions. The principle of “first-in, first-out” will then come into force on the stock exchange and presumably also on the crypto market.

“First-in, first-out” and the taxation of cryptos

According to the draft law, the “first-in, first-out” principle is to be applied to “specified securities”. The authorities assume that the respective goods, commodities or securities that were purchased first will also be issued or sold first. When questions arise about the taxation of crypto currencies, the difference between the first coin purchased and the current price would always count.

For example, if you buy a bit coin today for almost 17,000 dollars and in a few weeks a bit coin for 20,000 dollars and later decide to sell one for 37,000, you first have to sell the one you bought for 17,000. You would then have to pay taxes for the difference of $20,000.

Since this principle, however, so far refers to the securities not specified in more detail (at least with regard to crypto currencies), we are on speculative ground here. A more precise definition by the tax authorities is still pending. At the moment the Bitcoin is still classified as a commodity by the U.S. Commodities Futures Trading Commission.

It therefore remains to be seen until the law is finally waved through and whether further definitions will follow. However, since the mainstream adaptation of crypto currencies progresses with each passing day, a classification in the near future is obvious.

If the unfavorable case for US traders occurs that a higher taxation is incurred, possible tax loopholes are pre-programmed. Switching between different wallets, for example, could have an influence on the date of receipt of the coins. In any case, more precise definitions are still lacking. The situation for the taxation of crypto currencies in Germany seems (at least somewhat) clearer in this context.

Taxation of cryptos in Germany
In Germany, transactions with crypto currencies are currently still subject to the regulations of “speculative transactions” in the sense of ยง 23 Para. 1 No. 2 of the Income Tax Act. As they are not officially recognised as means of payment, they are classified as “ordinary intangible assets”. These are not then used to “pay” – rather it is a matter of a sale transaction.

Time intervals also play a role here. There is an exemption limit of 600 euros profit per year, which is not taxed. So if you buy a coin for 11000 Euro and sell it again for 11600 Euro, this is a tax problem. This regulation applies, if the distance between purchase and sales does not exceed the period of one year. But be careful: the exemption limit applies to all transactions throughout the year, not just one transaction.

However, if the period between purchase and sale is longer than one year, this rule does not apply. Then you do not have to pay taxes.

In all other cases, the standard income tax rate applies.

Crypto currencies and the minimum holding period
However, the minimum holding period of one year does not apply to commercial use – as is the case for companies or self-employed persons. Depending on the individual case, the profits generated may be subject to income tax, corporation tax and/or trade tax. Here m