Taxable and Nontaxable Events
A taxable event is simply a specific action that triggers a tax reporting liability. Whenever one of these ‘taxable events’ occurs, you’ll trigger what’s called a capital gain or capital loss that is required by the IRS to be reported on your tax return. Here are a few of the major taxable events to look out for: trading cryptocurrency to a fiat currency like the euro or US dollar, trading cryptocurrency to cryptocurrency, using cryptocurrency for goods and services, and earning cryptocurrency as income. A nontaxable event is just the opposite. These are events that incur no capital gains and are not considered required to be reported. Here are some examples: giving cryptocurrency as a gift to someone, a transfer from a wallet, or purchasing cryptocurrency.
Cryptocurrency Tax Software
You will need to pay taxes on your digital asset investment tax returns unless you reside in a country that doesn’t require you to pay capital gains taxes. Cryptocurrency tax software is software built for cryptocurrency traders to solve the tax reporting problem. It allows cryptocurrency users to aggregate all of their historical trading data by integrating their exchanges and making it easy to bring everything into one platform. Many traders and investors are beginning to use this software to securely create their required cryptocurrency tax reports.