Are you having concerns about paying taxes for sending crypto between your own wallets?
In many countries that include the US and the UK, their financial institutions do not consider or view crypto assets as a sort of real money or currency.
From this perception, crypto is handled in the same way as shares when it comes to taxation and it’s being taxed similarly. That is, all cryptocurrency is taxable in most countries especially in the UK.
Furthermore, the matter of cryptocurrency as clearly stated by the HMRC is subjected to capital gains tax as regarding disposal and income tax upon receipt, all depending on the actual transaction.
However, you won’t always pay tax on all crypto transactions especially in the UK, some of these transactions are tax free.
As you continue reading this content, you get to know if sending crypto to another wallet is one of those transactions that are tax free.
Is sending Crypto to another Wallet taxable?
As a crypto investor, transferring cryptocurrency between your own wallets is a tax free transaction, and the IRS has its clear backup as regarding this issue.
Meanwhile, you must know that in cases where the ownership of your crypto changes, the transaction has changed to a crypto disposal; this of which is subjected to capital gains tax.
This literally means that in the aftermath of your crypto disposal, you’ll either be liable to a capital gain or loss, all depending on the changes that has occurred to your crypto as regarding the price as compared to how much you originally bought it.
Therefore, moving your cryptocurrency between the wallets you own means that the ownership and the price you originally bought it hasn’t changed. For this reason, capital gains tax is not activated.
As this transaction has been said to be tax free, you must be aware that it can cause a lot of tax issues if you dispose your crypto in the future.
For instance, if Raphael buys $10,000 worth of Bitcoin from exchange A and he transfers his BTC into a cold wallet.
If Raphael eventually sells his BTC for $15,000 on exchange B. Exchange B does not know Raphael’s original cost basis (a certain amount that a crypto was purchased).
In this instance, Raphael’s capital gain is supposed to be $5,000 but Exchange B doesn’t know his original cost basis. If he hasn’t kept appropriate record of his original cost basis, the whole of the $15,000 might be calculated as capital gain.
To get rid of such instances as earlier stated, it’s important for you as a crypto investor to keep appropriate records of your cryptocurrency transactions which feature the date and time for receiving and disposing your crypto coupled with the price of your crypto at receipt and disposal.
Tools:
- Crypto Tax Calculator For Canada
- Cryptocurrency Tax Calculator Australia
- India Cryptocurrency Tax Calculator
- NFT Tax Calculator
- US Cryptocurrency Tax Calculator
Conclusion
As seen from the above content, you must avoid not keeping at all or keeping bad or inappropriate record of crypto transactions so as to avoid many tax issues.
If you find this very difficult or too busy to do, you may engage the service of any of the reliable crypto tax apps which supports more than enough cryptocurrency platforms and helps you to automatically track all of your wallet-to-wallet transfers and information like cost basis.
It also helps you make appropriate calculations pertaining to any gain or loss and tax liability when you dispose your cryptocurrency in the future and it works regardless of how many wallets and exchanges you’re using.