Digital asset investors embrace a bullish optimism

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Investors embraced bullish optimism about the incoming Donald Trump administration’s pro-digital asset policies; The Bitcoin (BTC) price has risen since the presidential victory earlier this month, reaching multiple milestones towards $100,000.

The Tulip Mania days appear to be back for Bitcoin, as its price reached a new record, surpassing $98,800 on November 21, after the US Securities and Exchange Commission announced that Chairman Gary Gensler would resign effective January 20, the day Donald Trump was scheduled to do so. it seems. He will be sworn in at the White House. Bitcoin fever is hot and global once again.

Bitcoin payment to athletes

In an unprecedented development in the UAE’s sports scene, players will be rewarded with Bitcoin in the first NFL event featuring some of the biggest names in American football in the Bitball Flag Football match. Flag football, organized through the International Federation of American Football’s 75 national member associations, recently became the official game of the NFL Pro Bowl and has been sanctioned as part of the 2028 Summer Olympics.

Leading the charge is Russell Okung, eleven-year NFL veteran and Super Bowl Champion, leading advocate for athlete financial independence, and the first professional athlete to be paid in Bitcoin. BTC Inc. George Mekhail, Vice President of Operations, commented:

“The flag football match at our Bitcoin event is no coincidence; It represents the collaboration and resilience of the Bitcoin community. Russell Okung’s effort to empower athletes with Bitcoin is a forward-thinking vision that moves us further into mainstream consciousness. “We are proud to host this mission at the Bitcoin Conference, which brings purpose and excitement to our participants.”

The star-studded roster also includes more than 22 football legends, including Antonio Brown, Le’Veon Bell, Johnson Bademosi, Jurrell Casey and Jared Evans. The roster also includes big name players like Dez Bryant, Dontrelle Inman, Mohammad Sanu, Randell Johnson, Michael Thomas, Craig Robertson and Wesley Woodyard, representing an array of talent from across the NFL.

The Bitball Flag Football game will be part of the official line-up of side events at this year’s Bitcoin MENA 2024, December 9-10, 2024, the largest global gathering of Bitcoin investors, developers and stakeholders. All Bitcoin MENA ticket holders will have free access to watch the Bitball Flagg Football match live from 19:00 on December 10 at Al Nahyan Stadium in Abu Dhabi. Individual tickets for the event, which blends sports, technology and digital assets, will be available for purchase from PlayBitBall, which will be distributed globally via Bitcoin Magazine platform Rumble and livestream on YouTube, allowing audiences worldwide to witness this unique fusion of Bitcoin. and professional football, which marks a cultural turning point for the UAE and the wider Gulf Cooperation Council region.

Digital asset taxation

Some good news for Bitball Flagg Football Players is that the United Arab Emirates does not have any income tax and has recently abolished value added tax on digital asset transactions. The UAE has positioned itself as a potential hub for digital currencies by exempting individuals and businesses from VAT on the transfer and conversion of digital assets (see Coincub Tax Report here). This means players will not be subject to double taxation on their digital asset income in the absence of the UAE and US Income Tax Treaty.

However, Bitball Flagg Footballers will be subject to worldwide U.S. tax on their digital assets, which are treated as property and subject to income tax or capital gains tax.

Digital assets taxed as income in the US

The IRS provides guidelines on when to count digital assets as income rather than capital gains. Transactions that are considered additional income subject to income tax include:

Receiving payments with digital assets (like Bitball Flagg Football players). Mining of digital assets (hobby level). I’m getting airdrops. Acquisition of new digital assets from hard fork. Staking rewards. Referral bonuses. Earning interest through lending protocols. Earning new liquidity pool tokens, governance or reward tokens in DeFi protocols. Learn how to earn rewards. Watch to win prizes. Check out to win prizes. GameFi awards. Digital asset taxation as an investment in the US

Digital assets held as investments are subject to tax at different tax rates. Short-term gains (retained <1 year) are taxed at 10%-37%. If you held a particular digital asset for more than one year, you’re eligible for long-term capital gains (held >1 year) at a rate of 0%, 15% or 20%, depending on your taxable income and filing status. NFTs deemed collectible may be taxed at 28%.

Digital asset losses can offset gains and reduce ordinary income by up to $3,000. Unapplied losses may be carried forward to future tax years until fully utilized.

The IRS does not allow digital asset investors to claim lost or stolen cryptocurrencies as a capital loss; Therefore, if a digital asset investor loses a digital asset due to hacking, fraud, or private key loss, the investor is out of luck and is best off writing it down.

Digital asset tax deductions

American digital asset investors can benefit from several tax-free deductions that may help them pay a little less tax:

Gifting digital assets under $18,000: You can gift up to $18,000 of digital assets per person tax-free (for 2024). This is known as the annual gift tax exemption. This can help you benefit from lower Income Tax rates on your home and pay less tax overall. If you gift more than this amount, you won’t have to pay gift tax in 2024, provided you qualify for the $13.61 million lifetime gift tax exemption. However, you may need to file Form 709 (more on this below). For 2025, that increases to $19,000 with a $13.99 million lifetime exemption. Capital gains tax-free allowance: If you earned less than $47,026 in total income (including digital asset gains) in 2024, you won’t pay capital gains tax on your long-term gains. For 2025, this increases to $48,350. Long-term capital gains tax rate: If you hold your cryptocurrency for more than a year, you’ll pay a lower long-term capital gains tax rate, between 0% and 20%, depending on how much you earned. How are digital assets reported on tax returns?

A digital asset owner declares digital asset taxes on their annual tax return, answering the IRS’ digital asset transactions question. A variation of this seemingly innocuous question appears at the top of Form 1040, the Individual Income Tax Return; 1040-SR, U.S. Tax Return for Senior Citizens; and 1040-NR, U.S. Nonresident Alien Income Tax Return. The question has also been added to the following forms: Form 1041, U.S. Income Tax Return for Estates and Trusts; 1065, US Return of Partnership Income; 1120, U.S. Corporate Income Tax Return; and 1120S, U.S. Income Tax Return for an S Corporation.

The IRS asks this question in different variations for corporations, partnerships, estates, and trusts:

“Did you at any time during the year: (a) receive (as reward, reward or payment for property or services)? or (b) want to sell, exchange or otherwise dispose of a digital asset (or financial interest in a digital asset)? Yes or no? The box indicates that there are transactions subject to digital asset tax.

Report digital asset dispositions, capital gains, and losses on Form Schedule D (1040) and Form 8949.

Report digital asset income on Form Schedule 1 (1040) or Form Schedule C (1040).

Report digital assets held on foreign exchanges, such as an exchange in the UAE, on FATCA Form 8938 and FBAR FinCEN Form 114.

Deadline for digital asset tax declaration

The US tax year runs from January 1 to December 31. Digital asset tax deadlines are the same as traditional assets: April 15 for most people. If the digital asset investor is an immigrant living in the USA, you have until June 15.

If you requested an extension to file your taxes using Free File or Form 4868, you will automatically be entitled to an extension through October 15.

Can the IRS and state tax departments track my digital assets?

Yes; Both the IRS and state tax departments can track digital assets. The IRS won cases against Coinbase, Kraken, and Poloniex, forcing them to share customer data, and the IRS has cross-border access for tax evasion.

This February, the IRS filed its first independent crypto tax fraud case, which led to the guilty plea of ​​Frank Richard Ahlgren III for filing false tax returns that underreported gains from a $3.7 million sale in Bitcoin. USA v. Ahlgren was the first crypto case involving allegations of tax evasion unrelated to another crime; This is also the first independent crypto tax fraud case to result in criminal charges. It is stated that Ahlgren faces up to three years in prison.

At the state level, billionaire Bitcoin bull and MicroStrategy co-founder Michael Saylor, who evaded more than $25 million in local income taxes with false records and returns from 2005 to 2022, paid $40 million to settle a lawsuit alleging major local and state crime . He committed tax fraud by lying to authorities about where he lived for years.

Ahlgren, Saylor, and the Department of Justice’s lawsuit against Roger Ver (also known as “Bitcoin Jesus”) underscores the commitment of the IRS, State Department of Taxation, and Department of Justice to investigate digital tax evasion. The IRS stated earlier this year that its enforcement focus would be on digital assets and highly networked individuals. In light of these developments, digital asset owners and investors may wish to re-evaluate their tax reporting and disclosure obligations to ensure compliance.