I’ve heard all the hype about bitcoin, and cryptocurrency is the wave of the future. The more I hear about it, the more I want to start getting involved. As I don’t like to jump headfirst into anything, I wanted to ensure I had the best understanding of how virtual currencies work. More importantly, I wanted a clear understanding of how it is viewed and taxed by the federal government. Seeing as how I typically owe a tax bill each year, and I’m juggling a bunch of other debt, I didn’t want cryptocurrency to become another issue. After careful research, this is what I’ve learned.
Cryptocurrencies Are Property
While bitcoin and other virtual currencies serve and act as money, the federal government has classified them as property. Any portion of bitcoin obtained through mining is taxable. If you used virtual currency to purchase something, exchange, or sell, it’s also taxable. Lastly, if an employer pays you using cryptocurrencies, this is considered taxable income. On the bright side, if you suffer any capital losses, you can report these on your taxes and receive a break.
Keeping Things In Order
After learning a bit about how my cryptocurrency investments will impact my taxes, I decided to clean up past debts before I invest. This way, if I do end up owing a tax bill next year, I’ll be able to afford it more easily.
One of the biggest financial burdens I have right now is credit card debt. I had a few high-interest credit cards over the years that I charged a lot of purchases on. Repaying them became less of a priority, and now the balances are through the roof. If I was going to invest in bitcoin this year, I wanted to get this debt back to a manageable level.
I did some digging and came across a company called Brice Capital. They are a team of financial advisors that assist individuals with high-interest credit card debt. You can restructure your debt by applying for a consolidation loan. The loan has low interest and affordable monthly payment options to save you money and keep you on track.
I think the best part for me was that my credit card accounts were paid off, which meant no more late fees, collection calls, and unfavorable credit ratings. I could budget the loan payments reasonably easily and develop healthy financial habits that will last a lifetime. After just a few months, I also started to see some significant improvements in my credit report.
Securing More Income
Now that I had a method to reduce my credit card debt, I figured I needed a solution to start investing in cryptocurrencies. Since all investments come with some sort of risk, I didn’t want to use my regular income to get started. Therefore, I began researching avenues to bring in more cash. I live in a metropolitan area, so I decided to work as a rideshare driver and deliver food.
I figured I could earn a decent amount of money this way without it interfering with my schedule. I used some of the money to pay down my debt consolidation loan from Brice Capital, and the rest I set aside in a savings account for investments. After a few months of paying down my credit card debt and working my side jobs, I was ready to begin my cryptocurrency journey.
When you hear about new investments or opportunities to earn money and grow your wealth, it’s easy to get caught up in the mix. Although it could be a lucrative opportunity, it’s always best to do your due diligence. By doing my homework on cryptocurrencies, I learned about how it impacts my income taxes each year. Essentially, before I started accumulating tax debt, I figured it was best to get my finances in order. Taking this path was the best thing I ever did because now I can invest without the guilt or financial burden.