Cryptocurrency Taxes in Florida: What Investors Need To Know During Tax Season

Tax season is upon us and if you are one of the many people trading Bitcoin or other cryptocurrencies, understanding the tax implications is essential.

Florida tax attorney Ronald Cutler is a certified public accountant and a former FBI special agent. He explains what you need to know about cryptocurrency during the 2024 tax season and how it could impact your tax obligations.

Cryptocurrency and Federal Tax Liability

Tax season is a hectic time of year, and filing deadlines can come quickly. 2024 was a popular year for cryptocurrency, and a Pew Research Center study reported that nearly 20 percent of all Americans either own or traded cryptocurrency. Unfortunately, many are unaware of how it could impact their tax returns.

The Internal Revenue Service considers cryptocurrency a type of property, so every transaction has potential tax implications. While Florida does not impose a personal income tax, cryptocurrency transactions are still subject to federal tax laws. Actions that could leave you owing money include:

• Selling cryptocurrency for cash;
• Trading one cryptocurrency for another;
• Using cryptocurrency to purchase products or services;
• Receiving cryptocurrency as payment or through mining/staking rewards.

If you invest in cryptocurrency, be aware of how it could impact capital gains as well. Short-term gains, held for one year or less, are taxed as ordinary income. Long-term gains held over a year get taxed at lower capital gains rates. The Internal Revenue Service warns that failing to report cryptocurrency transactions can lead to potential tax audits and heavy financial penalties.

Cryptocurrency And Your 2024 Federal Tax Return

If you are one of the many people who invested in or traded cryptocurrency in Florida over the past year, be aware that it can impact your 2024 federal tax return in various ways. To stay compliant and limit potential tax liabilities, our Florida tax attorney recommends these tips:

• Do detailed record-keeping and track all cryptocurrency transactions, including dates, amounts, and fair market values;
• Use reliable software to automate record-keeping and generate accurate reports;
• Keep in mind IRS reporting requirements for cryptocurrency and other digital assets;
• Be aware of potential tax deductions, such as hardware costs for mining and transaction fees;
• Use cryptocurrency losses to offset capital gains;
• Adjust your investment strategy to align with current tax laws and market conditions.

To Reduce Cryptocurrency Liability and Prevent Audits, Contact Our Experienced Florida Tax Attorney

Cryptocurrency offers exciting opportunities for Florida investors but can also pose significant tax challenges. By staying informed about federal tax laws concerning digital assets and being proactive in your accounting practices, you can minimize the risk of audits and maximize your investment returns.

For trusted legal help with cryptocurrency tax planning or compliance, contact Florida tax attorney Ronald Cutler, P.A. With over 50 years of experience providing trusted legal guidance to clients throughout the Sunshine State, he can help you navigate this tax season with confidence and peace of mind. Reach out and request a consultation today.

Sources:

pewresearch.org/short-reads/2021/11/11/16-of-americans-say-they-have-ever-invested-in-traded-or-used-cryptocurrency/

irs.gov/newsroom/taxpayers-need-to-report-crypto-other-digital-asset-transactions-on-their-tax-return