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!
Cryptoadvisor I agree. What I am talking about is if there are countries with tax rules that would mean users are discouraged from delegating stake so CF needs to be on top of that if that is the case as it could have implications for participation levels on delegation of stake. I do not mean CF or IOHK needs to do tax advice.
That’s why there’s an Enterprise type of addresses, which allows you to opt out from consensus process. Basically anyone (including government agency) will be able to confirm that you’re not staking those funds.
You have hit the nail on the head. I request for a read of the price and date of each payout should be an easy calculation that can be fed into a wallet scheme like Yoroi and Daedalus.