U.Today - Jeremy Hogan, a lawyer well-regarded in the XRP community, recently critical tax advice for digital currency investors.
Through a series of posts on the X social media platform, Hogan focused on the tax implications of trading activities, emphasizing the importance of understanding the differences between short-term and long-term capital gains taxes for crypto holders.
Decoding tax implications
Hogan's posts address a common strategy among crypto investors: temporarily switching from XRP to another cryptocurrency in the hopes of quick profits.He warns that this method could inadvertently affect their tax liabilities. By selling and later repurchasing it, investors lose the beneficial long-term capital gains tax rate, potentially subjecting themselves to higher short-term rates.
As a result, traders might find themselves facing the steeper short-term capital gains taxes, which can be as high as 30%, compared to a more manageable 15% for long-term holdings.
Hogan's explanation serves as a crucial reminder for traders to consider tax consequences in their investment strategies.
Crypto taxes around the globe
In the United States, cryptocurrency holders are primarily subject to two types of taxes: capital gains tax and income tax.Capital gains tax is applied to profits from the sale of cryptocurrencies, with different rates for short-term (held less than a year) and long-term (held more than a year) holdings.
Income tax is levied on cryptocurrencies received as payment, through mining, staking, or airdrops, based on their market value at receipt.
Internationally, tax laws vary significantly; several countries, including Portugal, Singapore, Malta, Switzerland, Germany, and Belarus, offer more favorable or even zero tax regimes for cryptocurrency gains, either through specific policies or the absence of capital gains tax.