What is the difference between capital gains and ordinary income for cryptocurrency?

1 answers

• Muskaan singhOct 17, 2020 · 5 years ago
  Ah, the difference between capital gains and ordinary income for cryptocurrency. It's a topic that often confuses many people. Let me break it down for you. Capital gains are the profits you make from selling or exchanging cryptocurrencies after holding them for a certain period of time. These gains are subject to capital gains tax, which is usually lower than the tax rate for ordinary income. On the other hand, ordinary income refers to the money you earn from regular activities, such as your job or business. This income is taxed at your ordinary income tax rate, which can be higher than the capital gains tax rate. So, if you're a long-term investor in cryptocurrencies and you sell them after holding for more than a year, you'll likely be subject to capital gains tax. But if you're actively trading cryptocurrencies and making profits on a regular basis, those gains will be considered ordinary income and taxed accordingly. It's important to keep track of your transactions and consult with a tax professional to ensure you're reporting your cryptocurrency gains correctly.
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