As the governments seek for more avenues to regulate the cryptocurrency sector, taxes are significantly becoming a worrying trend among the potential investors. It’s apparent that the famous 1031 tax-free exchanges are no longer used for crypto. However, there are other ways to that one can transfer the virtual currencies without triggering tax laws.
Last year was the best year for all the crypto investors since the returns were enormous and unbelievable. It’s now 2018 and the interest in the growing cryptocurrency sector remains high. As a result, the evasion could be more challenging especially for new crypto investors.
Recently, the Japanese cryptocurrency traders were reportedly evading the oncoming Japanese tax season which is being carried out between February 16th and March 15. In Japan generally, the cryptocurrency earnings are reported as the ‘miscellaneous income’ hence incurring the capital gains taxation of 15% to 55% due to the digital currencies being classified as ‘legal assets or properties’. Some traders have criticized the law implemented by Japan’s National Tax Agency, especially concerning the payers’ annual income brackets.
Some virtual currency traders are seeking tax advice on how to avoid tax jurisdictions on the income derived from the cryptocurrencies. Nonetheless, there are various ways that one can use to avoid triggering taxes when transferring the digital currencies. For instance, one can give out a token in a form of a gift, which will not attract any income tax to both the donor and the recipient unless the recipient transfers or sells it. However, to avoid income taxes, one has to specify it as a ‘gift’.
According to the law, the gift must not be more than $15,000, which is known as the ‘annual exclusion’. The amount is what one requires to send or receive as a form of gift annually without triggering tax charges. The amount of crypto sent within a year that exceeds the stated amount could be subjected to the income taxes. Hence one can give the cryptos as gifts amounting to the amount each year to a number of people without necessarily reporting to the authorities for the income taxes.
