The taxation of crypto is an issue that affects the ever growing number of crypto users across the globe.
We wouldn’t be too wrong to say that, when new crypto tax laws are introduced to the US, all the other countries follow suit immediately after.
So, if we want to check out the consequences of crypto tax laws globally, the US laws on the taxation of crypto could be a good starting point.
After that, we could generalize the discussion and conclusions to other countries.
For the sake of writing this post, I won’t take into account the case of crypto users who don’t report their crypto assets to be taxed.
Based on an article that was published on the Coinbase website, I want to focus on three points.
These points refer to the taxation of crypto as capital and as income, and using the cost basis concept.
Practical tax issues affecting Hive users
OK, let’s imagine the following real-life scenario.
A Hive user writes content and publishes it on the Ecency app.
His content gets upvoted, and he is rewarded with Hive and Hive Backed Dollars.
According to crypto tax laws, his rewards are considered ordinary taxable income, which must be reported.
But what happens if his post is rewarded with only 0.002 Hive?
At the time of writing this post, 1 Hive is equal to 0.41 US dollars, so he would get a whopping taxable income of 0.00082 US dollars.
Wow, honestly, another millionaire in the making!
In addition to getting some Hive, he is also rewarded with 55 PHOTO tokens through the Hive-Engine platform.
Currently, the price of PHOTO on the Hive-Engine market stands at 0.0002543 USD, so 55 PHOTO tokens would be equal to 0.000139865 USD in total, which is also taxable as ordinary income.
He then decides to stake his PHOTO tokens, hoping to get a return, and after a few days, he receives a reward of 0.01 PHOTO, which is equal to 0.00000104263 USD of taxable income, as above.
Discussion and conclusions
As a result of the cost basis concept, the Hive user of the example must keep accurate records of the cost (or market price, if you like) involved in each and every crypto transaction that the makes on the Hive blockchain, regardless of how small or big that transaction is.
With time, and as his portfolio of crypto assets and tokens grows, the task of keeping exact records becomes cumbersome to the point that it finally goes out control.
This makes the process highly impracticable.
What is the point of applying crypto taxation laws to an amount of income as small as 0.000139865 USD?
Could and should such small amounts of income be exempted from legislation that refers to the taxation of crypto?
For example, when this small amount becomes larger over time, it would make more sense to apply taxation to it.
Because, not every crypto user, hodler, and staker is a big-time investor.
But, if he or she doesn’t keep accurate records of even the smallest of his or her crypto transactions, he or she is illegal.
As a conclusion, tax legislation on crypto needs much more refining and tuning both nationally and globally.
In this way, it will be able to take into account and correctly meet the needs of all crypto users, with special focus on small users, rather than treating as potential fraudsters by inevitably turning them into involuntary tax evaders.
Thank you for reading.
Sources and further reading:
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