Crypto social trading has made it easier for millions of enthusiasts around the world to enter the crypto market. Already known platforms and new ones, such as the Bidsbee Crypto Social Trading Platform, are attracting more and more new traders thanks to the ability to reproduce effective strategies of professionals and fast learning.
However, not all of the novices take into account such a factor as the timely payment of taxes. To ensure that late mandatory payments from crypto trading do not become a problem, get to know the details of paying taxes.
Understanding Crypto Social Trading
The latest innovative trend called crypto social trading has emerged in the cryptocurrency industry after the impressive success of this practice in fiat currency trading. It brings together experienced professionals and novices by creating incentives for knowledge sharing:
- New traders have the opportunity to copy the strategies of experienced ones and even without any fundamental knowledge to make a profit.
- They can participate in discussions on community forums and ask professional traders questions to improve their knowledge.
- In return, they pay a small commission to the traders whose strategies they copy.
Tax Considerations for Crypto Social Trading
Many blockchains were intended to create conditions for transactions that are not controlled by the state. However, the IRS noted the increasing importance of crypto in financial transactions and introduced crypto tax regulations. According to them, crypto is treated as property, so if you have conducted any deals with cryptocurrencies during the past year, this must be indicated on the tax form.
There are only a few exceptions when a crypto transaction is not a taxable event:
- When you transfer crypto between your wallets;
- When you use it as a collateral;
When you buy crypto to hold it and do not conduct any further operations.
Reporting and Compliance
When paying tax on transactions from crypto, you need to determine and report capital gains. When calculating this indicator, both loss and gain are taken into account. Therefore, you need to keep a careful record of all transactions and collect any confirmations, such as receipts. Cryptocurrency exchange platforms can send tax forms to traders, but not each of them does, so it’s best to keep this issue under your control.
Tax Planning and Strategies
As with other assets, there are ways to minimize tax liabilities. Crypto traders actively discuss them in detail on such well-known social trading platforms as eToro, Bybit, NAGA, InvestMates, and others:
- Hold crypto for over a year. In this case, the rate will be lower than if you made transactions with crypto within a year after the purchase.
- Offset capital gains with registered losses. The more losses you document and report, the lower your taxable amount will be.
- Make charitable donations. By doing charity, crypto owners can count on a reduction in tax liabilities.
Find out other ways of minimizing taxes by asking for professional tax advice on social trading platforms.
The taxation of crypto and transactions with it is a relatively recent phenomenon, so additional clarifications and regulations should be expected. Stay informed about all the innovations regarding tax obligations in crypto social trading. And if you have any questions, ask them to professionals on specialized platforms.