As cryptocurrencies become stronger and more commonly accepted, it’s critical for investors to be knowledgeable of the tax implications associated with owning and trading Cosmos (ATOM). Let us dive deeper into understanding these ramifications in this guide specifically catered towards United States traders.
What is Cosmos (ATOM)?
Cosmos (ATOM) is a digital currency that functions within the decentralized Cosmos blockchain. The innovative network of independent blockchains connected by the powerful Cosmos Hub offers users an unprecedented level of control and versatility, allowing for seamless communication among independent chains.
How is Cosmos (ATOM) taxed in the US?
US taxpayers must be aware of the tax treatment of Cosmos (ATOM). As directed by the Internal Revenue Service (IRS), cryptocurrencies are thought to be property and should therefore have any gains or losses from their sale or exchange subjected to capital gains tax. Thus, ATOM is subject to this same taxation process as all other digital currencies.
When you sell ATOM at a gain, the resulting capital gains tax rate depends largely on how long you held it. If less than a year, your ordinary income tax rate will apply; if more than one year, then the lower long-term capital gains tax rate is in effect.
Moreover, if you’re paid with ATOM for goods or services rendered, the fair market value of said ATOM at the moment it is received must be reported as taxable income on your yearly tax return. Thus, make sure to include the worth of all incoming ATOM when reporting to Uncle Sam.
Reporting Cosmos (ATOM) on your tax return
If you possess or trade ATOM, it is critical to document your transactions and declare them on your tax return. To ensure that everything is up-to-date, the following information needs to be reported:
- The date you acquired the ATOM
- The cost basis of the ATOM
- The date you sold or exchanged the ATOM
- The fair market value of the ATOM at the time of the sale or exchange
In order to accurately report profits and losses from investment transactions, you’ll need to fill out Form 8949. Furthermore, the total amount of capital gains or losses must be reported on Schedule D when filing your tax return.
Accurately documenting your ATOM trades with the cost basis and fair market value is critical in order to correctly report capital gains or losses, thereby avoiding any unanticipated tax penalties. Keeping reliable records helps guarantee that you remain compliant with all relevant regulations.
If you transact in Cosmos (ATOM) cryptocurrency, it’s critical to document your transactions and reflect them on your tax return since they’re subject to capital gains taxes within the US. Therefore, if you have any worries or queries regarding your crypto investments, seek advice from a certified tax specialist for more information.