I bought 1 bitcoin and sold part of it to make cash from time to time. How will tax on this income be calculated?
I’ll start this off by saying I’m not a tax professional, so take this advice as you will...
At the time you purchase your bitcoin, your purchase price becomes your cost basis. This means if you bought 1 bitcoin for $10,000 then this is the price you will compare your capital gain/losses to.
For example let’s say you buy 1 bitcoin at $10,000. A week later the price of 1 bitcoin is $12,000. You decide to sell half your bitcoin due to the price hike and you receive $6,000 for the sale. Your tax liability would be $1,000 in capital gains (sale price of half a bitcoin is $6,000 minus original price of half a bitcoin is $5,000). I believe the in the US the tax on short term capital gains is whatever income tax bracket you fall into, so you would pay a X% capital gain tax on the $1000 profit you made from selling half your bitcoin.
Again I’m not a tax professional, but this is my understanding of how it all works based on lots of research.