This one is going to be for the readers in the US (there’s a lot of us). And the reason I say we need to get accustomed to calling our crypto holdings, “crypto assets” is for tax reasons. So simply calling them assets will always be a mental on switch in your mind to how these things work.

Let’s get into it!

So one of the things as investors we always have to be watching out for here in these United States, is of course the IRS. You see, the US government really only takes in about 3 trillion dollars a year in taxes. That sounds like a lot but you know how this government can spend that in a single bill or policy. The federal and state governments exist solely based on debt and make believe money that it’s not even in possession or control of. So the long and short of it is we pay taxes to the government so the government can pay the FED for a ponzi scheme that is mathematically impossible to ever pay back in full. Everything is DEBT!!! Well, at least for those jokers.

So how does all this relate to us? (And please remember I’m not a CPA or a financial advisor, however much of this information actually comes from those groups so I’m just repeating it here. You will of course have to do your own research and consult your own tax professionals when doing anything crypto based).

So the IRS views crypto as property and expects to tax you on any capital gains you have once you turn that crypto back into dollars. Why you would want to turn crypto into dollars, at least for the long term I honestly can’t begin to know, but that is considered a taxable event. And an expensive one. You’re more or less going to be paying 40% on those capital gains you just made at just the federal level, if you decide to sell and take dollars in return. Not a great idea, and a pretty bad deal for you. However if all you’re doing is buying crypto assets and storing it on your hardware wallet, you’re fine. That’s typically what I do under most circumstances. You’re just buying into another asset and storing it. Bitcoin can go to a million dollars a coin and nothing happens until you sell it or swap it into another crypto asset.

The other reason these aren’t currencies (at least in the US) is because it’s not legal tender. Let’s say you head over to your favorite merchant who might happen to be a precious metals dealer or a comic book shop or a pizza place and you choose to buy whatever it is you want in bitcoin, guess what. TAXABLE EVENT! And we’re not talking sales tax here, we’re talking simply being taxed for using the crypto asset to begin with! Most governments around the world do not like the digital asset class because they can’t control it. Ergo, many will penalize you for using it and being you’re own bank. The US government is all about that. (Now if you’re using a privacy coin and so is the merchant, well that will be harder to trace if not impossible)

So really, there are tons of ways to make income with crypto. TONS OF WAYS! But depending on what you’re doing and how you’re doing it, you’ll need to see how bad the damage will be and if the cost of that passive income is worth it for you. A good CPA will understand how best to shield your capital from taxable events like we’ve talked about above, so make sure you get a good one. These are really only two circumstances I mentioned, but there’s a lot more. In the next blog we’ll talk about staking and/or lending certain crypto assets (what I’ll be calling them from now on so you remember) on various platforms and how to make these big banks look like chumps with their 0.01% savings accounts while you’re earning 7.4%. Yup, 7.4%! Doesn’t that make you mad? These criminal institutions (banks literally pay millions in fines every year because they break the law) are able to lend money out to others with high interest, usually in the form of credit cards or expensive mortgages, with dollars they don’t even have while giving you peanuts for keeping your money in their ponzi scheme monetary system. No wonder more and more people are moving to digital assets every single day!

So we’ll talk about how you can get a real annual percentage rate with your own crypto assets in the next entry here at The Gilded Library and we’ll be diving into precious metals soon as well. Thanks for being a part of this blogs maiden voyage! I appreciate you stopping by!

Stay tuned!!!