Cryptocurrency has emerged like a fire in the jungle and people are using it just like paper money to make investments, make financial transactions, pay for purchasing commodities, or to get services. This is the year that is good to trade crypto. There are a lot of organizations that accept cryptocurrency as something of value to sell something. Even now you can buy a Lamborghini using this digital money.
Any income, profit or gain that you are generating through any sort of cryptocurrency trading whether short-term or long-term, is considered taxable under the rules and regulations of the International Revenue Service (IRS). The outline regarding the taxation of digital currency was drafted in 2014 and has been applicable since then.
What is a Cryptocurrency Tax Calculator?
Various governments have proposed income tax rules for the income or gains arising from the trading of cryptocurrency. Many governments are now discussing these regulations even in their annual budgets. For example, in India, the government has imposed a tax of 30% on any income, profit, or gain that would result from the transaction of digital currency.
There are different rules and regulations. For instance, if you are making a transaction using cryptocurrency where any loss occurs during or after the transaction instead of the profit, you cannot offset or adjust this loss with the income earned from any other head. Moreover, these losses cannot be brought forward for the years hoping that in the future, there will be any gain from crypto trading and the loss would be adjusted.
Henceforth, the income tax calculator makes it convenient for the taxpayer to estimate the amount of tax to be paid by the application of income tax rules that are relevant and accurate. The usage of a cryptocurrency tax calculator is of vital importance for individuals who are willing to invest in the digital market.
How to use a Cryptocurrency Tax Calculator?
There are 4 steps for this purpose.
- First of all, you have to select the tax year of your own choice to calculate the tax of that particular year.
- Then you have to make the selection of the status of your tax filing.
- Thirdly, you’ll put the prices (Purchase & Sale)
- In the final step, you’ll calculate the tax on crypto
You are provided with a utility tool in which you have to put the price of selling the cryptocurrency and you also have to put the price at which you acquired that currency in the past. The tool will display the amount that you owe as tax liability for the crypto transaction that you have made. Here is one more important thing: you are also responsible for the payment of a significant additional charge and duty over the amount to be paid in the form of tax.
To get accurate results, the particulars that you have to enter in the tax calculator should be based on transactions and not the accumulated data of the entire calendar year. Besides this, any other expense should not be attached to the cost of purchasing because according to the rules and regulations of income tax, anything else other than the purchasing cost cannot be deducted from the price of selling an asset.
Eligibility criteria for using Cryptocurrency Tax Calculator
To make yourself suitable for using Cryptocurrency Tax Calculator, you should be having at least a single VDA (Virtual Digital Asset) like coins in cryptocurrency or the NFTs. And the acquisition cost and the selling price must be in your knowledge.
Benefits of using the Cryptocurrency Tax Calculator
- You can compute the taxable amount in simple steps and it is a user-friendly tool.
- The results regarding the amount to be paid as tax liability can be calculated in seconds.
- All the appropriate provisions of tax are applied and you can get the accurate amount that you have to pay on any transaction made by cryptocurrency trading.
- You can get a true picture of the taxable amount that you are owing to the government.
Conclusion
The cryptocurrency tax can be calculated by using a tool named Cryptocurrency Tax Calculator and which is so convenient to use to get the taxes dues.
