I am not even sure if the standard e-file services, like H&R Block, have an option for this? Will I now be required to not take the standard deduction and have to itemize all my taxes?
I certainly can’t answer tax or tax-software related questions.
I would argue it’s not IOHK’s or “Cardano’s” responsibility to provide a price correlation mechanism to fiat. I would also note that the overall issue doesn’t strike me as any different than PoW mining and so I question whether it’s fair to claim that “IOHK is putting a tax burden on stake holders”. The miner is putting that on themselves. Governments put the burden on miners.
As for correlating to fiat, it seems to be a fine opportunity for a 3rd party to provide a website or API that ingests a bunch of timestamps to generate a corresponding report that lists the prices at checkbox-selected exchanges at those timestamps.
The question seems to me to be: “Is IOHK in any way working with (lobbying) governments to help clarify or make friendly Tax regulations in relation to cryptocurrency mining?”
Or again, “Considering regulatory compliance, will staking wallets somehow restrict participation from particular geographic/political regions?”
Let’s be fair,
The goal of IOHK is to get as many people to delegate stake as possible. It is IOHKs’ responsibility to remove as many barriers to entry as possible. One HUGE barrier is TAX burden of it’s stake holders. If IOHK simply chooses not to create an easy UX/UI for its stake holders to use, then this will prevent the little guys from contributing to the network.
No one is asking IOHK to do my taxes. All the community needs is a tool to help them track.
The attitude of "let some other 3rd party right the code, does not align with IOHK’s mission statement.
Everyone on this forum has heard the saying “all you need is 1 ADA to stake” In reality, this is not currently practical.
Do you agree?
So, the question is something like: What steps are IOHK taking to encourage tax laws that are friendly towards mainstream adoption of ADA staking and crypto-mining in general especially in light of the fact that the protocol benefits from many small stakeholders but at the same time tax laws in many important jurisdictions are unfavorably burdensome for small stakeholders?
You mentioned 3rd party software. Maybe H&R Block or TurboTax will integrate some of these features in and the first to do so will gain competitive advantage. If IOHK wants to provide a pricing correlation mechanism (inside their staking wallets) and integrated into their disbursement report capability, fine - that would be cool. I can see how doing something like this may be really helpful towards encouraging mainstream adoption, as would lobbying governments.
Realistically, I should be able to report a wallet address to the IRS and they should be able to do the whole calculation themselves. They could have a smart-contract that automatically calculates and withdraws my taxes, if they were savvy.
I still don’t see how IOHK is putting a tax burden on anyone, in bold, no less. It’s a larger ecosystem question. IOHK wants a level of participation that is made difficult by regulations. The desire to stake (be a miner) and the individual act of doing so (participating in the protocol) and government tax laws are what put on a tax burden.
@jeromeyers I think we have to agree to disagree. But I enjoyed this healthy debate. This is what this ecosystem is all about.
I think we can both agree that there is room for improvement in the area of Taxes.
@Cardano Community, what do you guys think?
Thanks for participating and posting your questions in our AMA Contest thread. It is very much appreciated.
Staking & taxes seems to be an interesting topic and discussion, however, we want to make sure to keep discussions separated from the AMA Contest thread. I have moved your discussion to this topic.
Thanks for understanding, and enjoy your time on our forums!
@Katsumoto Understood. On the other hand, I was attempting to keep the discussion focused on coming up with a better form for the question - one with less accusatory overtones - since the internet is simply filled with that kind of languaging and I personally find it off-putting.
@SebastienGllmt Will this exporting of transaction history be added to the Daedalus wallet? I’m personally more of desktop user.
Continuing the discussion from TAX implications for staking:
I noticed you moved the conversation over. However the redirect link is broken. When you click on the link from the orginal post, it displays an error. Please look into this. Thanks
Yoroi is a browser extension as well as a mobile app, I only use it on a laptop, via Brave.
Pun intended, I excel at excel. However, I have not been able to create a spreadsheet that will pull a USD price of ADA when I receive my distribution. I would love to see a tutorial on this. I am sure the community would love it as well.
Wow. That is GREAT news! I think you may have converted this daedalus user over to Yoroi. Keep up the good work. I would love to see a youtube video of this if possible.
That is the coolest feature yet, thank you for sharing. I can see now that the future is bright!!! This makes my tax preparation way easier.
We already have a simple version for exporting in Yoroi. And we are already working in adding different currency to be displayed with transactions (usd, yen, yuan, etc).
We will even add the tax events when staking and exporting to excel. I’m a permanent resident in NY, so I’m aware of tax implications (Federal, State and even City) and we are addressing them.
I don’t know about the compatibility between different wallets, so I will strongly recommend to use Yoroi from the start if you care about exporting tax events in a simple way.
I know that I am really late to this conversation but I am confused about one thing. I was always under the assumption that taxes for cryptocurrency were to be paid when the cryptocurrency was reverted back to fiat. I live in the US so if someone wouldn’t mind giving me a quick explanation on the actual reality of tax implications please do so.
Hi Michael. I’m not a tax expert but you are partly correct. You do have a taxable event when you turn one crypto into fiat or another crypto and you register your gains or losses at that time. Be careful about how long you hold the crypto as you may have short term or long term capital gains tax. The tax rate is much higher for short term capital gains. I have recently heard that crypto is considered property so long term and short term may not apply as those rules apply to stocks, but you should definitely speak to a professional. In addition to that when you earn staking rewards it’s treated like income so you pay income tax on that at whatever income tax bracket you are in. When you convert it to pay taxes in USD any gains since you received it are taxed again. This is for US taxes.
Here are some videos on the topic:
I contacted the crypto tax preparation site CryptoTrader.Tax to try to determine if their software could handle Cardano staking. The reply contained: “All you have to do is import the amount of cardano you receive, our historical engine will automatically retrieve all of those historical prices of cardano, so you don’t have to! It happens all automatically.”
What about countries where getting a stake reward changes the tax rules (not saying this is the case but this should maybe be looked into) so you have to pay a larger tax (considered interest on your currency) if you stake than if you not. Perhaps we will not see participation in staking from such countries? I think this topic actually has a lot of relevance for PoS in general and should perhaps be something CF should have awareness of.
This is a long thread, so I havent read every single comment, but in my view, it is not IOHK’s responsibility to talk to you about tax implications because:
- Cardano is a global ecosystem, it is not their role / responsibility to investigate tax burdens for every jurisdiction in the world.
- By the time you are actually receiving or earning rewards, the blockchain will be in ‘shelley’ phase which will be full decentralization. Meaning IOHK is not in control and, again, is not responsible for investigating tax burdens for every user around the world.
- DO YOUR OWN RESEARCH. It is your responsibility, much in the way your employer hands you a paycheck (at least in the USA) and it is your responsibility to report, file, and pay any necessary taxes.
- Taxes are a personal and case-by-case issue.
I think this falls on tax authorities to update their tax guidance!