Hi, this past year I sold a lot of my Bitcoin for house repairs, around 100k worth. I held this bitcoin for over 3 years now. I am worried on how much taxes I will be paying. I currently hold solana and have a -10k unrealized return on my solana. I was wondering if I sell my Solana, will it deduct the amount of taxes I will have to pay? and do I sell only 10K worth or can I sell the entire amount of sol I have which is over 35k? Thank you.
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Hi Anthony,
Cryptocurrency is similar to stocks. If you have gains, you will owe taxes; if you have had losses, you will not and may be able to write off some losses. Long-term capital gains are taxed at better rates than short-term gains. Any asset you have held for more than a year is considered long-term, so in your case, you may have long-term capital gains.
Long-term capital gains are taxed at 20%, 15%, or 0%, depending on your income.
Cost basis is the amount you paid for a crypto coin. Anything over what you have paid is a gain.
The accounting method you use, or the one you’ve defaulted to, determines your gains or losses when you sell. First in, first out; Last in, last out; and highest in first out. If you are using FIFO and you sell $10k of Solana, then the first coins you acquired will be sold.
Hopefully, this sheds some light on your situation, and I’m sure you may now have additional questions coming to mind. Good luck with the renovations and getting through tax season.
Nathan Mueller, MBA, CFP®
*This information is for educational purposes and should not be construed as a recommendation or advice.