You must be aware of this when you enter crypto in the tax return!

Even though cryptocurrencies like it Bitcoin, Ethereum or Tether are very speculative, they are becoming more and more popular with many investors. But be careful: the tax office is also interested in these transactions – Profits and losses on trading in cryptocurrenciesare relevant to the tax return. In the following article, we will show you what to specifically consider when it comes to cryptocurrency and taxes.

Cryptocurrency – the most important facts:

  • are cryptocurrencies other financial benefits in the sense of the EStG
  • Sale of cryptocurrency is private sales company
  • Cryptocurrency profits: Taxation at the personal income tax rate
  • 12 month holding period: Bitcoin and Co. only pay tax if they are sold within this holding period
  • Save taxes: Gains in cryptocurrency remain tax free until exemption limit of 600 euros and for sale after Speculation period of one year
  • Indication of crypto in the tax return: i Appendix SO – Other income

Legal classification of cryptocurrency

Cryptocurrencies such as bitcoin are not classified by lawmakers as “correct” currencies or as investments. Instead, they fall into the category of “Other assets‘and become like valuables treated. This classification, in turn, has an impact on the taxes that are levied on cryptocurrencies.

private investors must therefore be aware of the following when trading crypto in the tax return:

  • capital gains from crypto trading is subject to income tax and consequently after personal income tax rate taxed.
  • When you go through crypto trading speculative profits you have to pay tax on these profits yourself, as this is not done through the bank, as is the case with withholding tax.

Cryptocurrency and speculation period

Profits from trading in cryptocurrencies are not always taxable, for there is one Speculation period of one year. For you as private investors does it mean:

If you want the cryptocurrency lasts more than 365 days or longer and only then sell, fall no taxes on. But the same goes for the losses.h for the losses.

How the profit is generated is, moreover, irrelevant to the tax office, that is, one always pays tax on speculative profits (sales within 365 days) with cryptocurrency. The tax authorities classify both the purchase of goods or services with cryptocurrency and the exchange of cryptocurrency as the sale of cryptocurrency.

Effects of the speculation period on the indication of crypto in the tax return

As an individual investor, you should always document accurately, when you bought cryptocurrencies like Bitcoin, Binance Coin or Solana and at what rate to know exactly whether you have complied with the holding period. Because with more purchases or buying times, it can quickly become unmanageable.

In order to simplify the determination of profits, methods such as fifo or lifo for use. While there are strict requirements for the use of the FIFO method for transactions in foreign currency, With cryptocurrencies, you are free to choose which method you choose.

However, you need to keep that in mind FIFO method currently vPreferred by most tax offices and the FIFO method is also recommended in the BMF letter on income tax treatment of virtual currencies.

Fifo – First in first out Lifo – Last in first out
According to this method, it is assumed that the first purchased cryptocurrencies are always sold first.

FIFO is currently the most common method of determining the order of consumption when selling crypto

According to this method, it is assumed that the last purchased cryptocurrencies are always sold first.

Cryptocurrency Exemption Limit

Anyone who earns revenue from private sales transactions receives one exemption limit of 600 euros. Up to this value there are no charges. However, keep in mind that the exemption limit applies The sum of all sales transactions refers to and does not only include cryptocurrencies. If the profit exceeds the limit, tax is levied on the entire amount.

Cryptocurrency and Fees: How Do Losses Affect Cryptocurrency?

Losses in crypto trading can be set off against profits from other private sales transactions in the same year. If you have not had a profit for a year, the tax burden can still be reduced with the deficits because you can carry the deficit on to future years as well as carry them back to previous years.

Another option to save tax on cryptocurrency: Deduct account fees

Whether Bitcoin, Ethereum or Tether: As a buyer of cryptocurrencies, you need one account for the transactions invest, eg on a crypto exchange or a broker. This is also relevant to the topic of cryptocurrencies and taxes: you can deduct all fees charged for these accounts in the tax return.

Cryptocurrency: what about mining?

To Mining or prospecting for cryptocurrency is also relevant to the tax return. The Federal Ministry of Finance distinguishes between the Mining as a private and commercial activity. If you exchange the profits from cryptocurrency mining for ordinary currency or for goods / services, you have to pay tax on them.

Occasional income from mining is included in the tax return under the item “Other services” specified. As a result, taxes are paid only when the profits Per year256 euros exceeds.

In the case of mining, however, caution must be exercised with regard to classification by business / private. If the activity is carried out sustainably and with the intention of generating a profit, it can be quickly classified as income from a trade. Since the boundaries are fluid here, it is better to seek the advice of a tax / crypto expert.

Cryptocurrency can also become much more complex in the tax return

While the points just described for the treatment of cryptocurrency in the tax return are still easy to understand, it can also become much more complicated depending on the individual case. This applies, for example, in the following situations:

  • Make a profit on this Lending of coins or through strike: According to the current BMF decree on the tax treatment of cryptocurrencies “Income from other services” – the speculation period remains for one year. BMF thus moves away from the ten-year holding period in section 23, subsection
  • With the cryptocurrencies earned interest (eg via a peer-to-peer loan): Here will withholding tax due!
  • Crypto trading is coming income from business rained: So please trade tax and corporation tax due.

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