You Can Now Exchange Cryptocurrency for Venmo If You Like It
The cryptocurrency continues to gain widespread acceptance as PayPal announced the addition of Bitcoin, Ethereum, Bitcoin Cash, and Litecoin to its Venmo app. With a 70 million user base, this move will certainly make it easier for people to buy crypto, but it’s also a fickle investment that is taxed like property, so you’ll want to assess the risks and tax burdens before diving into both. legs.
How it works
By adding cryptocurrency , Venmo is joining its rival Square, which added Bitcoin to its app in 2018 . Users can buy or sell cryptocurrency, view cryptocurrency trends, and access cryptocurrency guides and videos in the app. As with peer-to-peer activity, crypto transactions will be public by default, so that users can “decide to share their crypto journey with their friends,” as PayPal notes in its press release (personally, according to previous Lifehacker advice , I I prefer to keep most of my Venmo rides a secret). Crypto on Venmo is launching today for select users and will be available to all customers directly on the Venmo app over the next few weeks.
Is cryptocurrency really a good investment?
It depends on your willingness to take risks. There is no single dominant cryptocurrency to bet on, and fluctuations in value are not for the faint of heart. But it’s also part of the appeal: people hear about double-digit percentage gains in value and think they’re missing out on it. And they can be. But at the same time, a double-digit drop is as likely as a gain – in fact, it happened last weekend when bitcoin fell 12.3% in value in 20 minutes, according to Crypto Briefing . In other words, you probably don’t want to rely on cryptocurrency for your retirement savings, but it can diversify your portfolio . Spend what you can afford to lose.
You Can’t Avoid The IRS
If you’ve thought of cryptocurrency as an off-chain investment option, the IRS does its best to dissuade you from this concept. Starting with the 2020 tax season, the IRS says it will take harsh action against people who do not report received, sold or exchanged cryptocurrency (however, simply buying virtual currency with cash does not count, according to E&Y ). There is even a specific question at the top of the 1040 that is difficult to avoid.
For tax purposes, the IRS treats cryptocurrency as property and not as a currency, which means that profits are subject to capital gains tax when you convert it to cash or otherwise sell it. If you sell it within a year, capital gains will depend on which tax scale you fall under, which can be as high as 37% (otherwise, if you hold it for more than a year, capital gains will be 0%, 15% and 20% depending on your income). However, on bitcoin.com , the cryptocurrency giveaways, rewards and giveaways are slightly different as they are treated as taxable income.
At the very least, you’ll want to consider the tax implications before investing (this post on Nerdwallet describes this pretty well) and keep a careful record of each transaction to save you the trouble with the IRS afterwards.