I am relatively new to cryptocurrency and need some guidance on how to liquidate my holdings. I have been trading on Binance and have made a decent profit which I would like to cash out. However, I am not sure how to transfer my cryptocurrency into my personal bank account. Can someone explain the process?
My primary concern is about the conversion procedure, if any, from cryptocurrency to a fiat currency. Is this done automatically when the transfer is made or do I need to convert the cryptocurrency into a fiat currency on my own? Is there any recommended conversion tool specifically for this?
Additionally, the tax implications are a big worry for me. I have heard that one might have to pay capital gains tax on cryptocurrency profits when cashing out. Can someone confirm this? And if so, how can I calculate the payable tax amount? The tax rules for cryptocurrencies are quite complex where I live (United States), so some guidance about this would be much appreciated.
To cash cryptocurrencies into your bank account, you need to sell them on your crypto exchange – in your case, Binance – and then withdraw the fiat money to your bank. To do this, first, go to the appropriate section on Binance, usually labeled as ‘Trade’ or ‘Markets’, and sell your desired cryptocurrency for a fiat currency like USD or EUR. After the sale has been completed, go to ‘Withdraw funds’ or a similar option, choose your bank account, and transfer the fiat currency there. The conversion from crypto to fiat is usually done at the market rate at the time of your sale.
As for taxes, it’s true that cryptocurrency gains are subject to capital gains tax in the United States. The exact rate can range depending on how long you’ve held your cryptocurrency; short-term gains (for assets held under one year) are taxed as ordinary income, while long-term gains (for assets held over a year) are taxed at a lower rate. The exact figures can be calculated using the initial purchase price of the bitcoins (the ‘cost basis’), the selling price, and your income level. It’s recommended to consult with a tax professional or advisor to ensure you’re accurately reporting and paying your taxes. Also, note that losses can be used to offset gains.