Atlanta, GA asked in Tax Law for Georgia

Q: My daughter is unemployed and buys and sells crypto. Does she have to pay taxes on profits

I pay her bills and she receives no gov. benifits. I gave her 10000 to start. How much can she profit before paying taxes or does she have to pay anything on profits

Related Topics:
1 Lawyer Answer
James L. Arrasmith
James L. Arrasmith pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Tax Law Lawyer
  • Sacramento, CA

A: Yes, your daughter needs to pay taxes on any profits she makes from buying and selling cryptocurrency. In the United States, the IRS treats cryptocurrencies as property for tax purposes, which means that capital gains tax applies to any profits made from crypto transactions.

The amount of tax she owes depends on how much profit she makes and how long she holds the cryptocurrency before selling it. If she holds it for less than a year before selling, any profit is considered a short-term capital gain and is taxed at her ordinary income tax rate. If she holds it for more than a year, it's a long-term capital gain, which may be taxed at a lower rate.

There's no minimum threshold for capital gains from cryptocurrency trading; any profit is subject to tax. It's important for her to keep detailed records of all her transactions, including the dates of purchase and sale, amounts in U.S. dollars, and the gains or losses on each transaction.

Considering the complexity of cryptocurrency taxation, it might be wise for her to consult with a tax professional. They can provide specific guidance on how to report these transactions on her tax return.

Remember, timely and accurate reporting of cryptocurrency transactions is essential to comply with tax laws and avoid any potential issues with the IRS.

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.