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In news that will likely cause much rejoicing, a crypto tax advisor on Twitter says that crypto traders may not have to file tax returns for 2018. While a number of caveats exist, the suggestion by CryptoTaxGirl should provide hope for victims of the ‘crypto winter’.
I've talked to a few clients lately who have no other income besides crypto, and if this applies to you, then as long as your taxable income from long-term gains is under $38,600 (single) or $77,200 (married) then you will not owe any tax and don't need to file a tax return.
— Crypto Tax Girl (@CryptoTaxGirl) March 11, 2019
The reason for the loophole on tax filing this year is due to regulations on long term capital gains. Per CryptoTaxGirl, coins held over a year are considered long term gains—a designation that increases the minimum filing amount.
Coins held for less than a year are considered short term gains or losses. These have a much lower threshold because they count as gross income. In fact, single filers must file with gains above $12,000, and married above $24,000. However, given the crypto bloodbath of 2018, even these numbers provide a significant cushion.
Of course, as with any loophole, the caveats are numerous. First, the coins must have been held for more than one year. Any purchases or sales made within the same calendar year are exempt.
Second, this loophole does not necessarily apply to state filings. Each state has various ways of reporting the gains or losses from cryptocurrency purchases or sales. Some states view long term capital gains as simple income, meaning that a return would be required for any filing that included such income.
Third, the rule applies to those with cryptocurrency gains or losses only. Someone who received income from other sources besides cryptocurrency would be required to file a tax return in order to report income from that source. For example, taxpayers who received a W2 would need to file, even if that filing were under the limits.
There are, of course, a host of other issues that may play a part. For example, taxpayers may want to file a return, simply to maintain a record with the IRS. Of course, were they to be audited, careful personal accounting would be necessary to prove that the gains were below the threshold.
One Twitter user was quick to point out that this exemption creates a simple and clean way of retiring. If long term gains are excluded under the amounts above, a holder could simply sell a small amount each month to live. This would create no taxable event, but would nevertheless be income for the retiree.
Additionally, such a plan would take advantage of the growth in the market. If the price of(BTC) were to increase dramatically, the amount sold would be much less. In this way, holders would be able to take advantage of gains in the market without creating a taxable event. Of course, they would need to live on less than the capital gains being reported—but if the payoff is not paying taxes, it might be worth it.
[As always, we at BeInCrypto advise that you seek professional direction from a licensed accountant or accounting firm. The information above is for news reporting purposes only.]
Are you in the (un)lucky group that does not need to file a tax return? Will you file one anyway, just to stay on the radar? Let us know your thoughts in the comments below!
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