Recognizing your taxes and making adequate report on them is paramount. The concept of crypto swapping is one of the crypto transactions that some taxpayers fail to recognize as regarding the awareness of whether they’re to report such transaction or not.
The idea of crypto swapping entails the process where you can comfortably do exchange of your crypto assets to get equal value of such asset in another token or coin.
This exchange of your crypto assets can be done directly with no need to get intermediaries engaged in the process of exchange. An instance of an intermediary engagement is the time wasting procedure of changing your asset to a fiat currency prior to getting the token of your choice.
Crypto is viewed as a digital asset especially in the U.S owing to the fact that the internal revenue service (IRS) also handles it in a general way just as bonds, stocks and other capital assets.
Similarly like these assets, your profit or gain from crypto as a digital asset is as well taxed at different rates, whether in form of income or as capital gains as dependent on the source of your crypto and for how long you’ve had it.
This article will be giving you precise and concise insights on answers as regards taxing as related to your crypto swapping transactions.
Do you get taxed for Swapping Crypto?
You must firstly need to examine how you have run your crypto transactions so as to have a better understanding of the taxes you owed.
Transactions that require a tax report are called taxable events while those that don’t require are called non-taxable events.
Swapping or changing crypto represents a crypto transaction that is subjected to capital gains tax. This means that your transaction is taxable when you convert one crypto to another.
For instance, you may want to use bitcoin to buy ether, and based on a precise fact it literally means that you want to sell your bitcoin prior to buying a new asset.
Therefore, since selling is involved, the IRS viewed the action as taxable and you’ll have to report tax on such action especially in the case where you made a sale that is greater than your initial cost basis.
Are Crypto swapping and Crypto exchange the same?
The terms ‘crypto swapping’ and ‘crypto exchange’ are usually used in place of each other but the terms differ in several ways.
While crypto swapping basically entails the direct conversion of your assets to another currency with the motive of cutting losses, building a portfolio, using crypto as payment, avoiding slippage costs or other high transaction fees.
Crypto exchange on the other side is basically for buying and/or selling crypto. It entails trading one crypto for another or a fiat currency depending on their current market prices with the motive of increasing your earnings either on a long or short term basis.
Conclusion
Be aware that your held crypto has no immediate gain or loss, so it’s not taxed. Taxing will only occur if you sell the asset, thereby getting either cash or units of another cryptocurrency. Gains gathered at this point make it a taxable event.
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