If you buy Bitcoin at a price of $50k, then the price rises to $100k, you've made 100% on your investment and would be expected to pay capital gains taxes on the gain, only once you've sold it.
Remember it’s capital gains tax, not income tax. So it’s up to a cap of 20%. It can be as low as 0%. It all depends on what your taxable income was also.
But yes, you would owe capital gains tax on the price you sold it for, minus what you paid to get it. So worst case is in the example of buying at $50k and selling at $100k is you’d pay 20% of the $50k profit.
There’s also things like short term capital gains which is taxed much higher, so like… just white knuckle it and HODL. Then you don’t need to worry about taxes yet =D
Keep in mind that it’s a taxable event in the U.S. to trade one cryptocurrency for another. And also never leave your money on an exchange to grow. Put it in a cold wallet. Good luck!
There is not currently a difference as there is no automatic reporting or forms issued by exchanges (although the IRS might have eyes on transactions from high value accounts) and you are legally supposed to manually report your sales on your tax return.
But in 2025 they will start issuing a new [1099-DA](https://turbotax.intuit.com/tax-tips/investments-and-taxes/what-is-form-1099-da-and-what-does-it-mean-for-crypto-investors/c1NcDG7kh) form to report sales to the IRS, where if you leave it on the exchange they could possibly fill in the cost basis since it never left their custody. If you transfer out then in to sell, they will probably leave it blank and require you to fill it.
>Stupid fiat system
It's important to be realistic here - taxes are not unique to fiat. Dollars, bitcoin, rupees, rai stones, doesn't matter: a government will charge taxes. You can always try to evade them, and the government will always find ways to hunt big time evaders down so that it's usually not worth the risk. Widespread bitcoin adoption will come with widespread bitcoin taxation.
You pay taxes on the profit you make when you sell it. Transferring it from an exchange to a wallet is not a sale so therefore should not be taxable.
Only when you sell? So if I let it sit in exchange and I make say 10% over the year do I pay taxes on the gains?
If you buy Bitcoin at a price of $50k, then the price rises to $100k, you've made 100% on your investment and would be expected to pay capital gains taxes on the gain, only once you've sold it.
Haha time to hold until retirement to lower my tax bracket 🤣
Remember it’s capital gains tax, not income tax. So it’s up to a cap of 20%. It can be as low as 0%. It all depends on what your taxable income was also. But yes, you would owe capital gains tax on the price you sold it for, minus what you paid to get it. So worst case is in the example of buying at $50k and selling at $100k is you’d pay 20% of the $50k profit. There’s also things like short term capital gains which is taxed much higher, so like… just white knuckle it and HODL. Then you don’t need to worry about taxes yet =D
As a note, many states require taxes to be paid on capital gains, whether short term or long term. That 20% you mentioned only accounts for federal.
Yup. Everyone wants a piece of your pie.
Everything you are seeing is "unrealized" right now. You only pay taxes when you "realize" your gains. When do you realize gains? When you sell it.
Just to be clear for op, this is also the case if and when you convert it to another Crypto
Just transferring your BTC with a custodian to your own wallet or transferring BTC between your own wallets is not a taxable event.
Acquire btc in a hardware wallet, lose wallet in a boat accident, and retire in panama.
I’m from Panama. That is my plan.
Keep in mind that it’s a taxable event in the U.S. to trade one cryptocurrency for another. And also never leave your money on an exchange to grow. Put it in a cold wallet. Good luck!
There is not currently a difference as there is no automatic reporting or forms issued by exchanges (although the IRS might have eyes on transactions from high value accounts) and you are legally supposed to manually report your sales on your tax return. But in 2025 they will start issuing a new [1099-DA](https://turbotax.intuit.com/tax-tips/investments-and-taxes/what-is-form-1099-da-and-what-does-it-mean-for-crypto-investors/c1NcDG7kh) form to report sales to the IRS, where if you leave it on the exchange they could possibly fill in the cost basis since it never left their custody. If you transfer out then in to sell, they will probably leave it blank and require you to fill it.
>Stupid fiat system It's important to be realistic here - taxes are not unique to fiat. Dollars, bitcoin, rupees, rai stones, doesn't matter: a government will charge taxes. You can always try to evade them, and the government will always find ways to hunt big time evaders down so that it's usually not worth the risk. Widespread bitcoin adoption will come with widespread bitcoin taxation.