Cryptocurrency and Virtual Currency Accounting
Real Estate and Construction Accounting
Hey Saim, good morning, can you list the different implication for crypto as a hobby and business?
As the IRS states, people engage in a hobby for recreation, not to make a profit.
Most taxpayers buy, trade or exchange crypto as a hobby and through passage of time, interest, skill building and/or potential gains, the activity becomes more frequent (investing or re-investing) and a profit becomes the main motive, then such crypto activity could potentially be considered a for-profit business activity.
After a certain financial threshold, your crypto hobby will be considered a crypto business and increase your tax burden. A business is subject to self-employment taxes, i.e. HIGHER Taxes, especially if you don’t have a business entity where you can benefit from write-offs and deductions.
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© Saim Akif, 2021