Do I have to pay taxes on this 700% profit I made in cryptos in the last ten days?
To avoid headaches later on there are two things we need to know about crypto currencies and the IRS, the first thing is that YES, they are taxed and the second is how they are taxed.
Now that you know that uncle Sam takes a slice of the pie, I will tell you how he takes it. The IRS sees crypto currencies, (Bitcoin, Ethereum ICOs) as properties, so like capital assets, stocks or the solid real state you will not owe any tax on gains until you sell them.
It is also very important that you know that if you bought 10 Bitcoins at $1,000 and they have gone up to $5,000 and you want to purchase a house and transfer that bitcoin to the person who is selling you the house, you still have to pay taxes on that gap of $40,000 that you earned.
There are two different rates at which you could be taxed. If you bought and sold within 365 days this is considered short term capital gains and are taxed as ordinary income. If you bought and HODL for over 365 days and then decided to sell the this falls in the category of long term capital gains and are taxed a a preferential rate.
It is not always a good idea to hold longer just for the lower tax rate because there is also more risk involved, you are holding an asset that may lose value over time and miss on the earnings just because you were trying to avoid paying a higher tax rate, (I wish I had the problem of “ I made too much money in less than a year ” don't we all?)
For those of you eager to have a deeper knowledge on this matter, here is the IRS Bullytin, I mean, Bulletin that I added just to make your life easier, by the way, please go ahead and repost this, share it with your Bitcoin pals, after this free education I provided I deserve it.
IRS BULLETIN
https://www.irs.gov/irb/2014-16_IRB/ar12.html
Thanks for reading me!