How are Bitcoin and Ethereum Transactions Taxed?

August 11, 2022
Knowledge Center » Blog » How are Bitcoin and Ethereum Transactions Taxed?

Bitcoin and Ethereum are both subject to taxation. How much tax you have to pay depends on the country you live in, but generally, capital gains taxes apply to Bitcoin and Ethereum transactions. If you're selling Bitcoin or Ethereum for profit, you'll likely have to pay a capital gains tax. The exact amount of tax you'll owe depends on your tax bracket and the country you live in, but it's important to be aware that Bitcoin and Ethereum transactions are taxable.

Calculation BTC and ETH Taxes in the US

The US has a capital gains tax system that taxes Bitcoin and Ethereum transactions at different rates depending on how long you hold the asset. If you hold the asset for less than a year, you'll be taxed at your marginal income tax rate. If you hold the asset for longer than a year, you'll be taxed at a lower long-term capital gains tax rate. The long-term capital gains tax rate is currently around 20% for most taxpayers in most situations, but you'll want to refer to specific tax charts to figure out your exact tax burden. The other option is to use an automatic tax calculator for crypto, like Ledgible.

capital gains tax Bitcoin and Ethereum Tax in Other Countries

Capital gains taxes on Bitcoin and Ethereum also vary by country. In Canada, Bitcoin and Ethereum are considered commodities and are subject to a capital gains tax. The exact rate depends on your province, but it's generally between 50-75%. In the UK, Bitcoin and Ethereum are also subject to a capital gains tax. The rate depends on your tax bracket, but it's generally between 10-20%. Again, it's important to check the specific tax laws in your country before making any Bitcoin or Ethereum transactions.

Are there any special scenarios with Bitcoin and Ethereum Taxes?

Yes, there are a few special scenarios to be aware of when it comes to Bitcoin and Ethereum taxes. For example, if you're given Bitcoin or Ethereum as a gift, you may not have to pay any taxes on it. However, if you sell the Bitcoin or Ethereum for a profit, you will likely have to pay capital gains taxes. Another special scenario to be aware of is if you use Bitcoin or Ethereum to pay for goods or services. In this case, you may have to pay tax on the transaction as this often counts as a disposal in the eye of tax law. It's important to consult with a tax professional or utilize an automated crypto tax tracking tool before making any Bitcoin or Ethereum transactions to ensure that you understand the tax implications.

How to save money on bitcoin taxes

If you want to save money on Bitcoin taxes, the best thing you can do is to hold your Bitcoin for more than a year. This way, you'll be taxed at the lower long-term capital gains tax rate rather than your marginal income tax rate. You can also use an automated crypto tax tool to help you track your Bitcoin transactions and calculate your taxes owed. By doing this, you can be sure that you're paying the correct amount of tax on your Bitcoin profits.

In summary, Bitcoin and Ethereum are both subject to taxation. The amount of tax you have to pay depends on the country you live in, but generally, capital gains taxes apply to Bitcoin and Ethereum transactions. If you're selling Bitcoin or Ethereum for profit, you'll likely have to pay a capital gains tax. The exact amount of tax you'll owe depends on your tax bracket and the country you live in, but it's important to be aware that Bitcoin and Ethereum transactions are taxable.

About Trevor English

Trevor is a technology journalist & engineer who has made a career out of engineering and technical communication. His work has appeared on Curiosity, BBC, Interesting Engineering and other sites across the web. Originally the Chief editor for Interesting Engineering back in 2016, he now works with software & tech companies, aiding them in content marketing and technical communication. Currently living in Texas, he’s also a published children’s book author and producer for the YouTube channel Concerning Reality.

Stay up to date

gdf-logoABC Logo
SOC 1 & SOC 2 Audited
chevron-left-circlechevron-right-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram