Ali Raza
The affinity of young people towards cryptocurrencies appears to be significantly high. A study of the federal income tax returns released in 2021 shows that 4.5% of millennials reported taxable crypto transactions, which is significantly higher than any other age group. Higher age groups were least likely to report taxable crypto transactions.
Millennials report the highest taxable crypto transactions
The cryptocurrency market has largely attracted young investors globally. Millennials are leading the way in crypto transactions in the United States, accounting for a significant share of taxable crypto transactions in 2022.
A report released by TurboTax, a tax preparation software provider, noted that 4.5% of millennials reported taxable crypto transactions in 2022. In general, the percentage of people that had taxable cryptocurrency transactions was significantly small compared to the number of Americans that have made crypto-related transactions.
On the other hand, 2.9% of all the people who filed tax returns in 2021 included cryptocurrencies. The TurboTax report noted that this figure was significantly smaller than the figures provided in a survey by the Pew Research Center that revealed that 16% of respondents based in the US had interacted with cryptocurrencies.
The millennial age group, which includes people aged between 25 and 34 years, reported the highest number of crypto transactions on their tax returns. The group was followed by those aged between 35 and 44 years. The group that was least likely to report crypto transactions included those aged between 18 and 24.
Additionally, the report noted that the likelihood of individuals reporting their crypto transactions for tax purposes depended on their income. People with higher incomes were more likely to file taxable crypto transactions than people with lower incomes.
There were also noticeable discrepancies in the crypto-related tax filings in different regions. Crypto traders and investors in the West were more likely to report taxable crypto transactions in 2021. The Northeast region was the second most likely to report taxable crypto transactions.
Despite the growing popularity of cryptocurrencies among the young generation, the crypto market remains largely unregulated. The US Securities and Exchange Commission (SEC) has been criticized for failing to provide regulatory clarity in the growing cryptocurrency industry. The bankruptcy of FTX US, which was one of the largest cryptocurrency exchanges in the United States, has also triggered the need for more regulations.
Changing guidelines on crypto taxation
The guidelines around crypto tax reporting have significantly changed this year. In the US, Form 1040 requires taxpayers to answer queries about cryptocurrencies. The Internal Revenue Service (IRS) has placed much importance on crypto taxes, with the regulator believing there was underreporting taxable income in the crypto industry.
However, some states are already considering relaxing the taxation guidelines for crypto assets to attract more crypto businesses. Recently, the Arizona State Senate proposed a bill exempting cryptocurrencies from property taxes. Last year, Colorado became the first US state to accept payments for state taxes using cryptocurrencies.
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This article was written for Business 2 Community by Ali Raza.
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