Although cryptos are nothing new, and even though more and more people are investing in them each day, there are still certain uncertainties regarding how it all works and, what’s perhaps even more important, how these digital assets are regulated. Now, this second one is what troubles people most, as not knowing whether crypto transactions and ownership are taxable, and if so, how much, can lead them to legal problems. Another term you might have heard before is regarding expat taxes on cryptos, so in order to make it easier to understand, let’s first start by explaining what expat means and what expat taxes are.
1. Understanding what an expat is
If we want to understand the expat taxes, we first need to be sure that we understand what expat is because one thing leads to another. Another term that we can use is expatriate, and both of them have the same meaning. They represent a person who left the US and went to live abroad for a certain amount of time or permanently. From this, it should get much clearer what taxes on this matter are, what they mean, and how to pay them crypto-wise.
2. Expat taxes
US taxation system implies various types of them, and each of them is precisely defined, which makes it much easier for people to understand. For persons who have decided to live abroad but still have their green card or US citizenship, the rules are the same as they live in the US. It precisely means they need to file a tax return each year without exception. On the other side, the situation with people who do not have citizenship or a green card is different. They still need to pay taxes if they own something in the US, but they are paying expat ones and do not need to file a tax return. Remember that this is only the beginning, and the laws and regulations for digital money owners in the United States are complex. Now, this is not something that should scare you far from it, as just a bit more research is needed so that you can avoid dealing with any legal issues.
3. How it’s regulated in the US?
The thing that confuses so many regarding this issue is the filing status and, to be more precise, the fact that there are two of them. Namely, how much you will have to pay depends on the amount of time you had digital money in your possession and the basics of how it all works are actually pretty simple. If that period is not longer than 365 days, it means that you will have to pay as much as you have for traditional income taxes. On the other hand, if it is more than one year, then it is looked upon as a long-term revenue, and you need to pay fees according to that.
4. Understanding cryptocurrencies
Many people are already familiar with cryptocurrencies, and more and more of them start to use them every day. There are many reasons for that, but the main one is the simplicity of their use and the fact that we do not need to carry our wallets around, as they represent digital, not fiat money. We can choose among various digital currencies and use them around the world, yet, cryptos are not accepted as the main currencies by any country. Cryptos can be traded and exchanged, and IRS sees them as property instead of as currencies, which is the reason why people who own them need to think about taxes. Since that’s the case and since cryptos are considered digital assets for which we have to pay taxes, it’s good to know all the options and learn more about in which countries these taxes are low or non-existent, like in Portugal, for example, just to know how to reduce your expenses.
5. What is a must to know about expat?
The first thing to keep in mind here is that there are three ways that Americans abroad use cryptos, which are to send, receive, or use as an investment. It all starts here, and you first need to learn all that’s needed to be included when filing a tax report in order to know how to file it properly, so let’s focus more on that now.
6. Review all the transactions within that year
Now, this might seem like too much work, but it is the only way to determine the overall profits or losses you might have gathered during that year. So, go through all the transactions and find an answer on whether the coins appreciated or depreciated in value. Besides, check how many times you have traded cryptos with other people, or if you invested cryptos elsewhere, where and how much. After doing so, check for how long you have those cryptos in your possession and whether that period is more or less than one year.
7. Interactions with cryptos
If you decide to use crypto beside or instead of fiat money, there are three ways that you can interact with them: to send or transfer them, receive or use them as an investment. Of course, it is crucial to find a reliable platform and review each transaction to make sure that everything is okay because it is impossible to fix the errors later. There are taxes that need to be reported in each of these three situations, and they can vary from each other, so it is crucial to inform yourself in time.
As you can see, cryptos are becoming more and more popular, and it is expected that the number of their users will increase even more in the near future. It is almost certain that in the future, almost every person will use them instead of fiat money as it is certain that paying taxes is a must, and cryptos are not excluded from that. Because of that, we should learn more about them and be ready and prepared to use them, so if you are willing to read more about this topic, visit this website.