Are Cryptocurrency Gifts Taxed
Your cryptocurrency wont be taxed as long as it’s below the gift tax allowance, which is $15,000 for 2021.
However, the IRS treats cryptocurrencies like property, so if your gift recipient sells the crypto you give them and makes money on it, that profit is taxable. Crypto is taxed much like stocks so the seller will owe short-term capital gains tax if they held the cryptocurrency for less than a year and long-term capital gains tax if they held it for more than a year.
Learn How To Securely Send Bitcoin
Sending bitcoin is as easy as choosing the amount to send and deciding where it goes.
The exact procedure for doing so will depend on the type of Bitcoin wallet you’re using, but the main thing you need to know is the’address’ of the recipient. A Bitcoin address is an alphanumeric string that looks something like this:
One way to send bitcoin, then, is to simply copy the recipient’s address to your clipboard, then paste it in the send field of the Bitcoin wallet app you’re using.
Bitcoin addresses can also be displayed in QR code format. If you’re sending bitcoin from a mobile wallet like the Bitcoin.com Wallet, you can use your phone’s camera to scan the QR code of the address you want to send to. This will automatically fill in the address.
As for the amount to send, most wallets allow you to toggle between showing the send amount as bitcoin or showing it in your local currency.
IMPORTANT: Bitcoin transactions are irreversible, so if you send to the wrong address, you’ll most likely never see that bitcoin again.
Read more: Learn how to receive bitcoin securely.
Bitcoin Transactions Are Irreversible
One of the characteristics of Bitcoins blockchain is that it is immutable. Therefore, transactions using the blockchain are irreversible and cannot be amended by a third party, such as a government entity or a financial services agency. Also, it is not possible to file a charge-back for bitcoin sent to someone else. The only way to reverse, in a manner of speaking, Bitcoin transactions is by having the recipient send back the original bitcoin.
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Turn Bitcoin Into Cash Using Coinbase
To make things a little easier for you, I will now show you how to cash out Bitcoin at Coinbase.
1. First, you will need to open an account with Coinbase, link your bank account, and make a deposit. If you need help on how to do this, view our guide here. If you have already done this, proceed to step 2!
2. Once you have set up your account, you will need to send your Bitcoin to your Coinbase Bitcoin address! To do this, click on the accounts tab, open your Bitcoin wallet, and click Receive. You will then be shown your Bitcoin Coinbase wallet address. This is the address you need to send your Bitcoin to.
3. Once you are all set up, click on Buy/Sell at the top of the page.
4. Next, click on Sell.
5. The next step on how to cash out Bitcoin is in the wallet. Assuming you have now sent your Bitcoin to your Coinbase wallet, you should see your Bitcoin wallet and your default fiat currency here. In the example image below, I opened an account from the EU, so my deposit wallet is in Euros .
This will change depending on where you are located. For example, U.S customers have the option to withdraw to USD, and Japanese users can withdraw to JPY.
You will also see your withdrawal limit. If you have already verified your account, your limits will be quite high. However, if you need to increase this, click on See Limits and follow the additional verification instructions!
7. Once you click on Sell Bitcoin Instantly, your funds will now be in your fiat currency wallet.
Find Your Recipient Address
Some exchanges, like Coinbase, make it super easy to send Bitcoin.
Thats because with Coinbase, you can send Bitcoin to another Coinbase user by just typing in their email address.
However, most of the time, you will need your recipients Bitcoin address if you want to send them Bitcoin.
Their recipient address is their wallets public key.
So, where can you get the recipients public key?
If its a merchant / a friend, they will need to provide it.
If it is an internal transfer you want to do between yourself , then youll need to provide it yourself.
- If you created a paper wallet: you have been provided with the public key during setup.
- If you created an online wallet: you can locate your public address by tapping the deposit or receive button.
- If youre transferring to another exchange: youll also need to click the deposit or receive button to reveal your deposit address.
- If youre transferring to a hardware wallet you own : You will also need to find the receive or deposit button. From there, the public address will show up either on the small screen of the hardware wallet itself or on the app they provide.
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Should You Buy Bitcoin
In general, many financial experts support their clients desire to buy cryptocurrency, but they dont recommend it unless clients express interest. The biggest concern for us is if someone wants to invest in crypto and the investment they choose doesnt do well, and then all of a sudden they cant send their kids to college, says Ian Harvey, a certified financial planner in New York City. Then it wasnt worth the risk.
The speculative nature of cryptocurrency leads some planners to recommend it for clients side investments. Some call it a Vegas account, says Scott Hammel, a CFP in Dallas. Lets keep this away from our real long-term perspective, make sure it doesnt become too large a portion of your portfolio.
In a very real sense, Bitcoin is like a single stock, and advisors wouldnt recommend putting a sizable part of your portfolio into any one company. At most, planners suggest putting no more than 1% to 10% into Bitcoin if youre passionate about it. If it was one stock, you would never allocate any significant portion of your portfolio to it, Hammel says.
Creating A Bitcoin Cash Wallet And Obtaining A Receiving Address
Amid the crazy economy, a lot of people have noticed a number of cryptocurrencies like bitcoin , ethereum , and bitcoin cash have done far better performance-wise than a majority of stocks, bonds, and commodity assets worldwide. For instance, the crypto asset bitcoin cash dropped to a low of $150 per unit on March 12, 2020, otherwise known as Black Thursday. The price of bitcoin cash has gained 60.66% since then at todays BCH price of roughly $241 per BCH. At a price of $9,453 per unit, Bitcoin has gained 162% since March 12, when it traded for $3,600 for a brief period that day.
Besides the price rises, many people are beginning to understand the importance of a censorship-resistant and permissionless, electronic peer-to-peer cash. However, many people get frustrated when they try and learn the process of obtaining a crypto address, receiving digital currencies, and sending them to people after learning to store them in a wallet. In this article, you will learn the basics of all three of those tasks by leveraging a noncustodial Bitcoin.com Wallet and some practice.
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The Basics Of Sending And Receiving Bitcoin
If you want to send and receive bitcoin, heres what youll need:
- A digital wallet: This is how bitcoin and other cryptocurrency is sent, received, held, and oftentimes exchanged. There are two types of wallets hot wallets connected to the internet and cold wallets that are not connected to the internet.
- A bitcoin address: Your public bitcoin address is your unique identifier used to receive bitcoin. It is most often just used one time and associated with a single transaction, though it can be used for multiple transactions if needed. This is often displayed as a QR code or a long string of numbers and letters.
If youre new to crypto, some of these terms might not make sense, so lets unpack them.
How To Accept Bitcoin Payments
With so many people using cryptocurrencies like Bitcoin, businesses should consider accepting crypto payments from customers. Heres how they can do so.
As cryptocurrencies gain more traction, small businesses can capitalize on this payment trend by enlisting the help of an online payment processor.
During the past few years, cryptocurrencies have exploded in popularity, with assets such as Bitcoin, Ethereum, Polkadot and Litecoin all growing sizably. Bitcoins total market cap, for example, surpassed $1 trillion in February 2021.
As such, it should be no surprise that many of the worlds largest companies have begun accepting cryptocurrencies as payment for goods and services. Companies as varied as AT& T, the Dallas Mavericks, Microsoft, Overstock, Tesla and Twitch all accept Bitcoin and other digital currencies in 2021.
Small businesses can also take advantage of the crypto craze, and they can easily accept digital payments with the help of online payment processors. These processors typically offer a 1% or less transaction fee, which is less than the fees youll pay on most credit cards.
Here are six companies that can help you accept Bitcoin and other cryptocurrency payments.
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Should You Accept Bitcoin On Your Site
This is probably the biggest question youve first got to decide on. Once youve decided to accept crypto, the payment processing is fairly easy to set up, but first, youve got to decide if cryptocurrency is right for your business.
As big as crypto has become , its still something that divides opinion. For every devout crypto fan, theres an influential person talking it down. For all the positive talk you hear about it, the next minute you hear Jamie Dimon, chairman and CEO of JPMorgan, saying I personally think Bitcoin is worthless.
Its confusing, and when you dont fully understand the intricacies of how crypto works , choosing to accept crypto payments on your website can be a worrying decision.
Of course, everyones got their agenda, and when youre making your decision, you should remember that. Do your own research and find out if accepting Bitcoin on your website is in your best interests.
How To Use The Electrum Receive Tab
To receive bitcoin all you need to do is share one of the addresses in your wallet with the person who wants to pay you. With the receive tab Electrum tries to create a workflow for receiving bitcoin that incorporates adding a label to your address, an expected amount and saving all this in the wallet as a receive request.
The label and amount you set in the receive tab are only for your own reference. They are not shared with anyone and they dont restrict how much bitcoin someone can send you.
So heres how to use the receive tab in electrum:
So thats the Electrum Receive tab. As you can see its designed to hand out new addresses each time you need one. This is because address re-use is a bad idea. That is not to say you cant do it. Its just not recommended.
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Bitcoin Transactions Are Conducted On A Peer
The Bitcoin payment system is purely peer to peer, meaning that users are able to send and receive payments to or from anyone on the network around the world. Unless they are sending or receiving bitcoin from a regulated exchange or institution, the parties to a transaction do not require approval from an external source or authority.
Is It Safe To Give Out My Bitcoin Address
You can safely give out your Bitcoin address to friends, family, and acquaintances. No one can steal your bitcoin using just your Bitcoin address. They’d need both your address and the private key to it. However, you should know that, since the Bitcoin network is publicly viewable, whoever knows your Bitcoin address can easily find out exactly how much Bitcoin you have at that address by simply pasting the address into a Bitcoin block explorer like this one. They can also see every transaction you’ve ever made using that address. If you don’t want people to see this information, you’ll need to use a fresh Bitcoin address. Luckily, that’s easy to do. The Bitcoin.com Wallet, for example, allows you to create an unlimited number of new addresses, and creating a new address is done with the touch a button.
TIP: to protect your privacy, it’s recommended to use a fresh bitcoin address for every transaction.
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Bitcoin Has User Autonomy
Conventional fiat currencies are subject to multiple restrictions and risks. For example, banks are vulnerable to boom and bust cycles in the economy. Sometimes, these situations can end in bank runs and crashes, as has occurred numerous times in the past. This means that users are not really in control of their money. Theoretically, at least, bitcoin promises user autonomy because its price is not linked to specific government policies. This means that users and owners of the cryptocurrency are in control of their money.
How To Cash Out Bitcoin Using A Broker Exchange
So, now that you know the difference between the two favored methods, I will now show you how to withdraw Bitcoins to cash using broker exchanges!
Coinbase is the most popular broker exchange for buying and selling Bitcoin. They process more Bitcoin transactions than any other broker and have a massive customer base of 13 million.
- Withdrawal Methods: Coinbase lets you sell Bitcoins for cash, which you can then withdraw into your bank account. You can only cash out your Bitcoin into a bank account that you have already used to buy cryptocurrency on Coinbase. So, if you havent done this yet, I recommend purchasing a small amount of cryptocurrency first.
- Fees: The fees depend on the country that your bank is located in. For example, if you want to sell Bitcoin for USD, a wire transfer is $25. If you are located in the EU and have SEPA, then this costs just $0.15!
- Cash-out times: Withdrawal times also depend on the country that your bank is located. US withdrawals normally take between 4-6 working days, while EU withdrawals take 1-3 working days.
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What Happens If You Send Bitcoins To An Invalid Address
They will be lost forever.
Im sorry, but thats the blessing and the curse of Bitcoin. The Bitcoin blockchain is a permanent ledger that cannot be changed.
That makes it incredibly safe to store your Bitcoin, but also puts the full weight of responsibility on your shoulders.
Remember, with great power comes great responsibility.
Bitcoin Transaction Fees Explained
Whenever you transfer bitcoin using the blockchain, the transactions must be verified. This service requires paying a fee. The fee varies depending on how busy the Bitcoin network is. The busier the network is, the more it costs to get your transaction processed quickly. Larger transactions also require more processing power to verify, so they have higher fees than smaller transactions.
Fees may also be charged by the service you use to transfer bitcoin. The sender pays fees. Although your wallet or exchange may charge a fee, recipients should not have to pay any fees to use the blockchain. Estimated costs should be disclosed prior to the final submission of a transaction.
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Why Are Some Bitcoin Transactions More Expensive Than Others
Now let’s imagine Alice buys one more BTC at a later date from a different miner. Alice will then have 2 BTC in her wallet, but each one will have originated from different ‘notes.’ In effect, this means Alice has two 1-BTC notes in her wallet. If Alice wants to send 2 BTC to Bob, she’ll be sending those two notes. And since more notes means more data, and more data means higher cost, this transaction will be more expensive than if Alice had sent a single Ã¢â¬Ënote.Ã¢â¬â¢ Put another way, the transaction will consume more bytes, so Alice will have to pay more satoshis to convince a miner to include it in the next block.
For the average user, this means you’ll end up paying significantly more for a transaction if it involves moving many ‘notes.’ For example, imagine you’ve received a hundred small payments into your wallet from different people, over a period of months, until you’ve accumulated one full bitcoin. Now, if you want to send that one bitcoin to someone else, you’ll actually be sending 100 ‘notes.’ This will incur significantly more fees than if you’d sent a single ‘note’ as our miner did in the first example.
How To Pay Someone With Bitcoin
Weve covered sending and receiving bitcoin, but what about using it as a way to pay for goods and services? Major companies like Tesla and AT& T have started accepting cryptocurrency as a form of payment. Paying with bitcoin is just like any other send transaction! Different retailers may have their own way of accepting your transaction, so just be sure to follow their guidelines!
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Why Would Someone Want Bitcoin Instead Of Normal Money
The normal money we use today is actually rather unusual in the history of money, in the sense that it is no longer itself precious .
Now if you read the promise on a £10 note, it says :
“I promise to pay the bearer on demand the sum of ten pounds.”
That’s not too much of a promise if you consider that all the backing authority has to do is to print another piece of paper to satisfy that promise.
As more and more money is created, it erodes the value of the existing money in circulation. People don’t necessarily notice this erosion because the nominal amount of their money remains the same however, they do notice that their weekly shop, eating out, and watching movies costs more and more money.
Bitcoin is different.
The supply of bitcoins is carefully controlled and limited, and no one can create or issue more bitcoins at will. There will never be more than 21 million bitcoins and each bitcoin is itself divisible into 100 million units known as Satoshis. This prevents the kind of erosion of value that plagues normal currency .