Nostr Web Client

Here’s a question for the more advanced #BTC enthusiasts out there:

I’ve been hodling various cryptos in a self-custodial manner for years, so I’m not completely new to the world of #crypto.

Initially, when I knew even less than I do now, I tried day trading to get a feel for things, thinking it would lead somewhere. While I didn’t make a loss, it didn’t take long to realize all I was doing was generating a crazy number of meaningless taxable events with little to show for it. That’s when I switched to a HODL strategy.

In the meantime, an increasing number of vendors and service providers have started accepting BTC and other cryptos. Even #NOSTR seems to be promoting the use of BTC in everyday life via the Lightning Network.

That’s all great and definitely the way forward, but how do you guys—especially in the US, where crypto is considered property rather than currency—deal with the attached tax admin nightmare? Creating a taxable event every time I buy a pizza seems to create more hassle than it’s worth.

Does anyone have any tips or tricks for integrating small BTC payments into everyday life without creating an administrative #tax nightmare? How do you keep track of transactions? I’m not asking for loopholes or anything illegal; I just want to know how others manage it and whether I’m overcomplicating things.

Kevin 1y ago

This really depends. Are you dipping into your stack to pay these transactions?

My best advice came from Saylor a year or so ago:

Say I want to tip a waiter/waitress in #Bitcoin, I have my lightning or liquid wallet preloaded with sats, I go on an exchange and buy $20 worth, and then however many sats that gets me, I send it to him/her. This doesn't create a taxable event because I bought and gave it away same day for exact same value.

I do the same thing with purchases. I pre-ordered nostr:npub1gdu7w6l6w65qhrdeaf6eyywepwe7v7ezqtugsrxy7hl7ypjsvxksd76nak gold standard book. Bought the $30 of Bitcoin and then sent the lightning payment to him. No taxable event.

The only time you need to keep track is with your cold storage purchases that you sell. For that I usually keep a spreadsheet. Or have to look at the exchanges where I buy and calculate that way.

Reply to this note

Please Login to reply.

Discussion

GlitchyFren 1y ago

I see. Yes I keep these things separate. I don’t touch anything in cold storage. It’s like wine in the cellar.

Technically a same day non gift transaction (tip can be classed as gift) is still a reportable event here but I begin to feel the consensus is don’t bother about tiny amounts even if they are non gift transactions. I guess it’s a YMMV thing. Thanks.

senf 1y ago

You're right that those are taxable events still. If you want to have a recipient receive Bitcoin without a taxable event on your side, you can send from your dollar balance in Strike to a lightning invoice or Bitcoin address.

GlitchyFren 1y ago

Good idea. So do you declare peanut amounts?

senf 1y ago

It's not declaring peanut amounts, it's just not taxable for you at all. You're sending dollars. The taxable event is 100% on Strike's side and they track all that (again, for themselves, not for you) as part of their business.

GlitchyFren 1y ago

Oops sorry. My question wasn’t clear. What I meant was, when you do occasional small scale crypto to crypto stuff (say 1-10 bucks) that can’t be classified as gift, do you keep a record of those and declare them? If so, what do you use to keep track? Or do you just ignore these?

senf 1y ago

I do, yeah. I just keep them in a Google Sheet and put them on an 8949 when doing taxes.

GlitchyFren 1y ago

Thanks!