Credit Karma reveals US Bitcoin investors have roughly $1.7 billion of realized losses and $5.7 billion of unrealized losses in 2018. A new survey by the personal finance company finds, however, that affected Bitcoin investors are not aware of their tax obligations in relation to digital assets.
According to the report,
“More than half (58%) of all bitcoin investors were not aware they could claim a tax deduction for their realized bitcoin losses.”
While 53% of surveyed US Bitcoin investors say they would report their Bitcoin losses or gains during the upcoming tax season, 35% do not think they have to report their gains or losses in Bitcoin investments.
The consequences of inaccurate tax reports include interest and criminal prosecution. Individuals who fail to submit tax reports that reflect their digital assets may also lose the opportunity to deduct their losses.
According to Credit Karma, taxpayers can take key steps to report Bitcoin losses.
- Utilizing the IRS issued guidance on cryptocurrencies
- Reporting Bitcoin transactions using Form(s) 8949 and Schedule D
- Recording account history from cryptocurrency exchanges
- Utilizing reliable online services to track account information
According to IRS guidelines, cryptocurrencies are classified as property, not currency, which makes them subject to capital gains and income taxes.
“If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain. The taxpayer has a loss if the fair market value of the property received is less than the adjusted basis of the virtual currency.”
The aid of a qualified accountant is of great importance in attaining tax advice.
The survey was conducted by Qualtrics on behalf of Credit Karma. To calculate the aggregate amount lost in Bitcoin, the total number of US Bitcoin investors (6.5%, according to Qualtircs) was multiplied by the realized amount lost per person. The same methodology was used to calculate unrealized losses.
You can check out the full Credit Karma report here.