When dealing with cryptocurrency on any trading platform, we often have to think about dozens of factors. Whether or not the price is right, what returns we’re getting, the risks, etc. However, the one thing that we never think of is crypto taxes. That’s because crypto was made in a way that removed the third party, thus removing the need for tax.
Cryptocurrencies have always been exempt from applicable laws and given us absolute discretion. However, most cryptocurrencies like BTC and Ethereum have recently become taxable. The Bank Secrecy Act was established to prevent illegal activities such as money laundering. So what does this mean for crypto users? And most importantly, what does this mean for BitMEX users?
To understand things better, let us look at how crypto taxes work. According to the law, owning a digital asset such as crypto is not a taxable event. So you can own all the crypto you want without having to pay any taxes on what you already have. However, you will be liable to pay taxes on any capital gains, including crypto. For the sake of simplicity, let’s just say that capital gains = taxable income.
To explain further, owning crypto, such as BTC, is not a taxable event. However, buying or selling crypto and profiting from it constitutes a taxable event. So you have to pay tax when you profit from a transaction where you have used crypto. This is valid for instances when you have bought crypto using cryptocurrency.
Why Pay Taxes On Your BitMEX Earnings?
If you find yourself asking this question a lot, don’t worry, you’re not the only one. The truth is that crypto trading was always designed to be something for ourselves. An ecosystem where individuals could trade without having to pay taxes. An area free from any third parties and government channels. So what happened?
Well, long story short, governments around the world have started taxing cryptocurrency exchange and earnings from crypto referral programs as income. This means that they are no longer exempt from being taxed. It is definitely an inconvenience for us, but there is a silver lining to this.
As we know, cryptocurrency can often be used as a channel for criminals to hide in. This increases the chances of illegal activities and makes it difficult for crimes to be tracked. So, we could say making it taxable is a way to help prosecutors go after the bad guys. Either way, it would be wise to abide by the taxes rather than having the IRS at your door.
How Is Cryptocurrency Taxed?
Crypto can be taxed either as business income or as capital gain made from a transaction. What’s the difference between the two? Well, the difference has to do with time and purpose. To explain clearly, let us look at a typical scenario.
Say you bought an asset, sold it off within the same year, and made a profit. This will be considered as business income since you made the transactions the same year. So naturally, it will be included as taxable income during the yearly tax report. This is called short-term capital gain and can be taxed as income for the year.
However, what if you bought an asset but didn’t sell it off. What if you want to hold onto it and sell it off at a higher value next year? In this case, whatever profit you made from the purchase will be taxable income for the end of this year. Meanwhile, the value of the projected profit for next year will be taxed as long-term capital gains.
To put it into a formula, short-term capital gain= final sale price- cost of acquisition. Meanwhile, long-term capital gain= final sale price- Indexed cost of acquisition.
Does BitMEX Provide A Tax Report?
BitMEX does not provide a tax report, meaning you will have to do the calculations yourself. The website states that they are under no obligation to give us a tax report. But how exactly do we calculate the taxable income made by trading on BitMEX? Well, we have to use a crypto tax calculator.
Softwares like Turbo Tax are a great way for BitMEX users to figure out the amount of taxable income. In our opinion, a lot of the calculation has to do with the amount of profit made. BitMEX indices always measure the level of change of any asset in your wallet. It does so by comparing the asset’s current value with that from the last transaction. A similar scenario is used to calculate the amount of profit from the BitMEX platform.
As a BitMEX user, you don’t have to worry about doing all the accounting yourself. You can simply import all our transactions and data into a reliable tax calculator software. This can be done by following a few simple steps.
First of all, you’ll need to log into your BitMEX account in order to proceed further. Once logged in, simply move your cursor over to the top right side of the screen. You will notice that a drop-down menu appears when you hover the cursor over your profile icon. Select ‘my account’ from the drop-down menu.
This will open a new page with accounts and wallet-related information options. Under the wallet section, click on the history option to bring up all your transactions. Now, look for a blue box on the right side of the screen that reads ‘save as CSV.’ Selecting that option will save all your transactional data into a CSV file. You can now simply import your CSV file into a tax calculator software of your choice.
BitMEX Tax Reporting FAQs
BitMEX does not report your transactions to the IRS or any other tax authority. The BitMEX webpage has a disclaimer when it comes to tax reports. It states that they are under no obligation to provide a tax report to users or the IRS. This means that users will have to calculate their taxes on their own.
From the above, we can conclude that paying taxes on your BitMEX activities is a good idea, and to do so, you can utilize automatic 3rd party solutions such as Turbo Tax. The landscape in terms of paying taxes on your crypto earnings is the same whether you register an account with BitMEX or with any other cryptocurrency exchange as to how much you will be paying and from which events you will be paying, depending on the laws of the country that you are being taxed in. So if the taxation and a somewhat tedious BitMEX tax reporting have not scared you away yet, then consider giving our BitMEX review a read, to find out if BitMEX is the right trading platform for you.