Cryptocurrency continues to be accepted by the general public, as PayPal announced that they have added Bitcoin, Ethereum, Bitcoin Cash, and Litecoin to its Venmo app. With a user base of 70 million users, this decision will certainly make buying cryptocurrency easier, but it’s also a volatile investment that is taxed like property, so you’ll want to assess the risk and the tax burden. before you jump into both. feet.
How it works
By adding cryptocurrency, Venmo joins its competitor Square, which added Bitcoin to its app in 2018. Users can buy or sell cryptocurrencies, view cryptocurrency trends, and access in-app crypto guides and videos. As with its peer-to-peer activity, crypto transactions will be public by default, so users can “choose to share their crypto journey with their friends,” as PayPal puts it in its press release (personally, in accordance with previous Lifehacker tip, I like to keep most of my Venmo trips private). Crypto on Venmo is rolling out today for select users and will be available to all customers directly in the Venmo app in the coming weeks.
Is crypto really a good investment?
It depends on your risk appetite. There is no single and dominant cryptocurrency bet on, and fluctuations in value are not for the faint of heart. But that’s also part of the appeal: People hear about double-digit value gain and think they’re missing out. And they could be. But at the same time, a double-digit decline is just as likely as a gain – in fact, it happened last weekend, with Bitcoin losing 12.3% in value in 20 minutes, according to Crypto Briefing. In other words, you probably don’t want to rely on crypto for your retirement savings, but it can diversify your portfolio. Spend what you can afford to lose.
You can’t avoid the IRS
If you were thinking of crypto as an “off-grid” investment option, the IRS does its best to disillusion you with this notion. Beginning with tax season 2020, the IRS says it will crack down on people who do not report cryptocurrencies they have received, sold, or traded (simply buying virtual currency with cash is not does not count, however, by E&Y). There’s even a specific question about it at the top of your Form 1040, which is difficult to avoid.
For tax purposes, the IRS treats cryptocurrency as property rather than currency, which means that profits are subject to capital gains taxes when you convert it to cash or sell it for sale. ‘another way. If you sell it within a year, the capital gains will be the tax bracket you belong to, which can be as high as 37% (otherwise, if you keep it for more than a year, the gains in capital will be 0%, 15% and 20%, depending on your income). however, by bitcoin.com, crypto airdrops, rewards, and giveaways are a bit different because they are treated as taxable income.
At the very least, you’ll want to consider the tax implications before investing (this Nerdwallet’s Message presents it well enough) and keep detailed records of every transaction to save you trouble with the IRS later.