Many people enjoy using Bitcoin and other cryptocurrency for the financial freedom that it offers — especially because there are very few fees, if any, involved. Utilizing banks and regular stocks can come along with some large fees. However, this currency still does ultimately get taxed. Here’s how! How It’s Taxed The buzz about cryptocurrency is that it is not backed by any government affiliation and is subject to little or no regulation. However, this is false. When a crypto exchange occurs, both gains and losses must be reported to the Internal Revenue Service. Thus, this is taxed just like traditional stocks and personal assets. When it comes to federal income taxes, cryptocurrency is thought of as “property” and is therefore treated as a capital asset. This means that it is subject to capital gains taxes just as stocks and bonds are. If the asset appreciates in value and you trade, sell, or use it for profit, then it will be taxed just like capital gains. However, you only owe tax when those gains are realized. Realized gains are those that have been actualized when an existing position is sold for more than it was purchased. So, if the asset happens to depreciate in value and it is traded, sold, or used at a loss, you may be able to subtract the loss from other capital gains to reduce your taxes. So,Wait —How Is CryptocurrencyTaxed? A QUICK EXPLANATION
Calculating Taxes on Cryptocurrency Gains and Losses To determine your taxes on cryptocurrency, compare your net proceeds to your cost basis. You also must take into consideration the length of time that you owned the asset. This information is crucial for figuring out the type of capital gain or loss you recognize. Some gains or losses are determined to be “short term,” typically a year or less, and others are “long term,” more than a year. It is important to note that you can offset your capital gains with capital losses. Tracking your crypto gains and losses is crucial for staying on top of everything when tax season rolls around. As always, you can turn to your trusted financial advisor for professional assistance and advice.
Our Top 9 Estate Planning Tips for 2021 and Beyond Preparing for the Future
Creating an estate pl n is one of the best ways to prepare for the future. Here at Shoup Legal, we put together a list of our top nine estate planning tips for 2021 and beyond. 1. Make an Estate Plan Tomorrow is never guaranteed and an estate plan is one of the few surefire ways of knowing that your family and assets will be managed according to your agenda. 2. Put a Trust Into Place With a trust, you’re appointing a trustee to manage and make decisions. Trusts can provide specific guidelines for how and when your property is distributed. A properly crafted and executed trust does not need to go through probate. 3. Staying Up to Date Things are constantly changing and you need to make sure your estate plan accurately reflects your wishes. We recommend that you revisit your
estate plan every three years or sooner if major tax changes are imminent.
investment strategies that impact retirement accounts and can hurt the value of your assets.
4. Keep It Formal Do-it-yourself estate planning is rarely ever upheld by a court. This goes for online sources as well. It’s important to have a trained estate planning attorney help you with your plan. 5. It’s More Than Real Estate Most estate plans focus on how real estate assets are handled, but any item of value can and should be placed in a trust to minimize taxes and avoid probate court. 6. Life Insurance Can Help Life insurance payments are generally payable to beneficiaries income tax-free and can be used to help pay for funeral arrangements or other costs. 7. Watch Inflation Inflation of any kind can erode the value of individual and business savings. This can affect
8. Income and Employment Status Since the pandemic began, many people have felt the sting of unemployment or are making less than they made pre-pandemic. This can interfere with investing and can create major problems for your estate plan. 9. Inherited Property and Federal Tax Changes The American Families Plan Act is a proposal that will increase taxes on property left to heirs. The expected federal tax legislation that will likely go into effect by 2022 will also change how your estate plan looks. If you’re ready to create your estate plan or need to update the one you currently have, give us a call at (951) 445-4114 and we will be happy to assist.
Plan today for peace
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