The SEC action against Ripple has more than halved the price in a very short time. Now the exchange Coinbase has even announced to stop trading Ripple from 19.01.2021. In view of this news, many Ripple holders have parted with their coins at short notice. What is to be considered fiscally now?
As already here presented, according to the tax authorities, losses from cryptocurrency transactions only have an effect if realized within the tax holding period of one year. According to Section 23 (3) sentence 7 EStG, such losses can then be offset against gains that the taxpayer has realized from private sales transactions in the same calendar year.
Bob buys XRP on 02.12.2020 for 6,000 euros at a rate of 0.54 euros. On 12/29/2020, the rate has fallen to 0.18 euros, and he sells for 2,000 euros. Both the purchase and sale of the coins incurred transaction costs of 50 euros each.
Bob had more success with transactions in bitcoin in 2020 and realized a taxable capital gain of 2,500 euros.
In 2019, things also went better for Bob. Here, Bob realized a taxable capital gain from Litecoin in the amount of 1,000 euros.
Bob realizes a loss on the sale of Ripple, calculated as follows:
Sale price: 2,000 euros
/. acquisition costs: 6,000 Euro
./. transaction costs: 100 Euro
Loss on sale: 4,100 euros
The loss of 4,1000 euros is tax deductible because the loss was realized within one year (Sec. 23 (1) Sentence 1 No. 2 Sentence 1 and (3) Sentence 1 EStG).
Bob can therefore offset the loss of 4,100 euros against the (taxable) gain from Bitcoin of 2,500 euros (Sec. 23 (3) Sentence 7 EStG). After the deduction of the losses, Bob is left with a taxable profit of 0 euros for the year 2020.
With regard to the "remaining" loss of 1,600 euros, Bob can apply to the tax office in the income tax return for 2020 for the capital loss of 1,000 euros to be carried back to 2019 and offset there against the capital gain of 1,000 euros (Sec. 23 (3) Sentence 8 EStG). As a result, Bob will be refunded the income tax paid on the capital gain of 1,000 euros.
The remaining 600 euros are determined as a loss that can be carried forward and carried forward to 2021. If Bob realizes taxable gains from disposal transactions with cryptocurrencies in 2021, these gains can be offset against the loss of 600 euros.
Bob has bought on 25.12.2019 XRP for 6,000 euros at a rate of 0.54 euros. Due to the SEC action, the price crashes from 23.12.2020. Since Bob is afraid to realize the book loss, he hesitates to sell before Christmas and hopes for the "turnaround". Finally, on 12/29/2020, the price has fallen to 0.18 euros, and he sells for 2,000 euros. Both the purchase and the sale of the coins incurred transaction costs of 50 euros each.
Incidentally, Bob has realized a taxable capital gain of 2,500 euros with transactions in Bitcoin in 2020.
The loss from the sale of Ripple in the amount of 4,100 euros is irrelevant for tax purposes. This is because the loss was realized outside of one year (Sec. 23 (1) Sentence 1 No. 2 Sentence 1 and (3) Sentence 1 EStG). Therefore, Bob cannot offset the loss in the amount of 4,100 euros against the gains from private sales transactions with Bitcoins for tax purposes. Bob therefore has to pay tax in full on the gain from the sale of the Bitcoins in the amount of 2,500 euros. außerhalb eines Jahres (§ 23 Abs. 1 Satz 1 Nr. 2 Satz 1 und Abs. 3 Satz 1 EStG). Daher kann Bob den Verlust in Höhe von 4.100 Euro nicht mit den Gewinnen aus privaten Veräußerungsgeschäften mit Bitcoins steuerlich ausgeglichen. Bob hat somit den Gewinn aus dem Verkauf der Bitcoins in Höhe von 2.500 Euro im Jahr 2020 vollständig zu versteuern.
The examples show that even with losses from cryptocurrencies, you can do a few things right from a tax perspective and save a lot of money.