- An increasing number of jurisdictions are taxing gains on crypto assets
- Tax authorities are forcing exchanges like Coinbase and Bitfinex to disclose client information
- Nexo could help you save taxes of up to 39.6%
- Nexo loans allow you to spend your crypto wealth without selling assets while earning dividends and optimizing your taxes
- The tax-friendly Nexo Credit Card makes consumer spending easy and smooth
This April’s tax return may be a thing of the past but if you asked for an extension to settle your tax liabilities, the deadline is almost up. On a related note, tax regulators around the world and especially in the US show no sign of easing their oversight of cryptocurrencies.
Tax Authorities Closing In
There is hardly any country which does not have any crypto tax regulations in place.
The US Internal Revenue Service (IRS), for one, has demonstrated
the US government is absolutely resolute to crack down on crypto investors who may need to declare their holdings.
Consequently, other countries have followed suit, borrowing some of IRS’s principles and adjusting them to their own needs.
In the UK, regulations lend themselves to different interpretations and are somewhat outdated. Yet, they too state that income from cryptocurrency trading may be subject to capital gains tax.
Other jurisdictions, including Canada and Germany, also have laws in place treating cryptos as a taxable asset. Recently, the US joined forces with other nations and formed an international coalition to ramp up tax enforcement efforts in the crypto space.
Following in the footsteps of Coinbase, Bitfinex became the latest exchange to comply with tax regulations. In a statement, it notified some of its users that it was required to “report certain account information” to the government. The latter, in turn, “may then exchange that information with the tax authorities of the customer’s country of residence”.
The IRS and Crypto Taxes
For tax purposes, the IRS treats “virtual currencies” as property. As a result, investors, traders and
anyone who has sold their coins during the tax year, must file them on their tax return.Failure to do so may result in a penalty of up to $250,000.
This obligation holds true regardless of how taxpayers obtained their coins — whether they bought them on the open market, mined them or received them as a compensation for services.
The regulations apply also to crypto-to-crypto trading, referred to as “like-kind exchanges”. Generally, the IRS allows taxpayers to postpone paying taxes on sold properties when they “reinvest the proceeds in similar property”, e.g. when swapping a property for another.
Unfortunately for crypto enthusiasts, the exception no longer works for crypto assets. In an update from 2018, the IRS said that after the end of 2017, “[…] the nonrecognition rules for like-kind exchanges apply only to exchanges of real property held for investment or for productive use in your trade or business and exchanges of real property not held primarily for sale.” Following the changes, any crypto swap triggers a tax event.
It Pays to HODL
It is important to note that not all capital gains are made equal. The IRS distinguishes between short-term and long-term gains and treats them differently from a tax standpoint. When an investor holds an asset for a year or less before they dispose of it, the sale triggers a short-term gain or loss. The latter are taxed at the investor’s ordinary income tax rate of up to 39.6%.
Investments held longer than a year are considered long-term and taxed at a lower rate of less than 20%.
Simply put, as far as taxation is concerned, it makes sense to HODL cryptocurrencies for more than a year.
How Can You Benefit from Nexo?
By offering token holders the world’s first crypto-backed loans, Nexo gives them access to instant cash against their assets while retaining the upside potential of their cryptocurrencies. It, further,
saves them from a double setback where they might be forced to liquidate crypto holdings
to cover tax obligations, falling into the vicious cycle of multiple tax events every year.
Nexo launched its platform earlier in 2018, becoming one of the few companies with a live product only a month after reaching its funding goal.
Getting Your Instant Nexo Loan in Three Easy Steps in 200+ jurisdictions
We are glad to see the excitement among Nexo’s clients about our instant crypto-backed loans. Nexo provides crypto…
The Nexo Platform, which is already providing crypto loans to many hundreds of users around the world, has received an overwhelmingly positive response with more than $1 billion requests for Nexo’s instant loans. The Nexo Platform, which is already extending crypto loans to many hundreds of users around the world, has received an overwhelmingly positive response with more than $1 billion requests for our instant loans.
Nexo can help its users optimize their tax burden allowing them to borrow against their crypto assets instead of selling. This strategy often referred to as “The Zuckerberg Tax” has been long favored by the wealthiest people on earth. Oracle’s chief executive Lawrence J. Ellison is said to have borrowed more than $1 billion against his shares in the company as a means to finance a lavish lifestyle. Steve Jobs reportedly never sold any of his Apple stock, worth over $2 billion at the time of his death. His widow would only pay taxes on the difference between the sale price of the Apple stock should she choose to sell and the price at which she inherited the stock.
Deploy The Billionaires’ Strategy with Nexo
Nexo lets you have the best of both worlds. Since no sale occurs, using Nexo can help you avoid a series of tax events while receiving additional funds in the form of instant crypto-backed loans to spend at your discretion.
With Nexo’s loans, you do not need to be a billionaire to take advantage of their smart strategy.
Furthermore, the token’s dividend feature adds an additional benefit layer for investors. Nexo shares 30% of its profits with token holders through dividends, providing them with a passive income and essentially paying them to HODL.
Another great option for Nexonians comes with the Nexo Credit Card. Unlike crypto cards that let you spend your cryptocurrencies, the Nexo Credit Card allows you to HODL while retaining your crypto, thus not triggering a tax event.
The image below is an illustration of the advantages Nexo’s model offers.Consider a situation where you need access to cash today, so you sell $30,000 worth of ETH. You receive some funds but end up paying fees and taxes worth 2,841.22. Furthermore, you miss out on any potential future appreciation of your crypto assets because you have parted with them.
Instead, you are taking the broader view and use your ETH as collateral to take a loan from Nexo. In this case,
you get instant access to liquidity and your costs are almost half; plus, you get to keep your ETH and benefit from its upside potential.
For Individuals and Businesses
Using Nexo loans could prove beneficial for individuals and businesses alike. For instance, cryptocurrency miners can take advantage of our instant loans to cover capital expenses and expand their operations without liquidating assets. Similarly, hedge funds holding crypto and other digital assets can leverage their portfolio to tap into further investment opportunities. ICO and crypto companies, too, can open crypto-back loans to cover operating expenses while keeping their assets. Even crypto exchanges can opt for a Nexo loan to finance their margin lending and operations.
As a truly global player, Nexo adheres to the strictest financial, security and privacy standards
embedded in the country’s constitution. Combining our decade-long experience, technical expertise and robust client confidentiality standards allows us to offer a profitable and sustainable next-generation Crypto FinTech product.
We are working with a greater emphasis on helping crypto investors enjoy their wealth without missing out on its full potential, as we continue to innovate and rewrite the rules of the Crypto FinTech industry.
If you haven’t already, create an account with Nexo and start enjoying your crypto wealth today. You’ll keep ownership over your assets and build a sustainable passive income with Nexo’s dividends. You even have a chance to optimize your tax position.
*Note: Nexo and its affiliates do not provide tax, legal or accounting advice and this information is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.