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Comment by mtgx | Hacker News Reader

It's not sustainable to tax regular Joe for each and every cryptocurrency transaction due to the nature of cryptocurrencies, especially in the US where people have to do all of their taxes on their own.

I believe Canada has something like 20% tax on the profits you get out of cryptocurrencies for the year, which I think is a much simpler system that makes much more sense.

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The U.S. works the same way. You are taxed on the net short or long term capital gains not on every transaction. So if you made $1000 on one trade and lost $500 on another you would only be taxes on the net $500 profit.

You're taxed only on the gain from the transaction, but you have to report every transaction (at least in theory - I'd bet that drug dealers being paid in crypto aren't reporting them, but if you're going to break the law, you're breaking the law). The issue isn't the tax bill, it's the amount of work you have to do to track the dollar value of the cryptocurrencies involved (which may not even be well-defined, since many cryptos aren't available for U.S. dollars) when you make a transaction.

That's actually not true right now. Every time you trade it's a taxable event. So if you went USD --> BTC --> ETH --> BTC --> USD you would need to show 4 transactions to the IRS.

The total tax burden will look a lot like (Final USD - Total USD) * (Short Term Cap Gains Rate) but you can't just report it that way.

In 2017 I mucked around with Crypto and accumulated about 50 transactions over ~5 currencies. Reporting was a monster pain in the ass.

Given the libertarian bent of some people who are most attracted to Cryptocurrencies I'm guessing many don't report anything to the IRS voluntarily.

Even regular capital gains are kind of a pain to report, especially when you've inherited the stocks from a deceased relative who kept no records about them.

In Portugal, the IRS stated it was tax-free because nothing in the law fitted it.

Source: http://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/in...

Why should it be different than any other ForEx trading?

They wouldn't be taxed on every transaction, it would work like any investment where you claim capital gains and/or capital losses.

They are treating cryptocurrency as they do any other investment: you are taxed on each transaction for stock as well. If you were day trading you would have just as much pain come tax season.

That some people insist on trying to use crypto currencies as an expensive environmentally horrific currency is kind of irrelevant when the majority of users recognize that at best it’s a long term hodl investment

That isn't true... you aren't taxed on every transaction. You are taxed on your gains and losses... if you make $1000, it doesn't matter if you made 1 big trade or 100 small ones, you get taxed on the total (either long or short term capital gains)

But your gains and losses are just a sum of all your transactions.

If you had 100 shares of GOOG and sold one share each day, over 100 transactions, your gains and loses are the sum of each individual transaction.

Where things get bad is when you buy a coin, it goes up 10x, at the beginning of the next tax year you sell and buy some other coin, it goes down to where you bought the first coin, and now instead of being where you started, you owe 2-4x..

You can carry over capital losses to some extent

How is this any different than selling a house for $1 million, putting that $1 million into a different house, and then the value of that new house falls to $100k?

If you sell the second house for $100k, you're on the hook for the tax on the net capital gains.

I guess it's just more likely in crypto, and with crypto your money was a "currency" the whole time, not an asset.

This is the same thing that all currency traders need to deal with, and there are a ton of rules and regulations already in place with how to file taxes for it.

https://www.investopedia.com/articles/forex/09/forex-taxatio...

You can carryover the loss in future years.

and each trade will have a separate line item in your tax return, and strictly speaking you are mean to withhold in the period you make the sale

> I believe Canada has something like 20% tax on the profits you get out of cryptocurrencies for the year, which I think is a much simpler system that makes much more sense.

This is wrong. Canada is taxed very similarly to USA meaning if it's an investment it may be capital gains and if it's a business then it's income.

I'm always impressed by how people make up statements online without any kind of research that would take less than 30 seconds. No Canada has no special tax rate for cryptocurrency, what kind of non-sense is that.

In Canada, capital gains are taxed at 50% of ordinary income, unlike the US where short term capital gains are taxed as if they were 100% ordinary income.

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