Your taxable income will not be reduced by any crypto purchases made automatically with after-tax funds.
Throughout the course of the previous year, a number of prominent people, such as the mayors of two major cities and a few professional athletes, have expressed their desire to receive at least some of their compensation in bitcoin and have stated their intention to do so. This includes the desire expressed by a number of prominent people, such as the mayors of two major cities. Even if there isn’t a Bitcoin exchange in your area, you can still convert your salary into satoshis through the online portal of your bank if you are optimistic about bitcoin and receive your paycheck through direct deposit. If you get your paycheck deposited directly into your bank account, you have the ability to do this. (One bitcoin is equal to one hundred million satoshis; this is a direct correlation between the two.)
Because we are paid in bitcoin, the vast majority of us do not have salaries that are determined by bitcoin. This is because bitcoin is our primary form of payment. Instead, it means that your employer will send a portion of your paycheck that is denominated in fiat currency to a bank account that is associated with a cryptocurrency exchange. This transfer will take place directly from your employer. After that, the funds are put toward the purchase of bitcoin, and the total amount that is obtained as a result is subsequently sent to your digital currency wallet.
Coinbase, the most popular cryptocurrency exchange, recently introduced a feature that enables users to directly deposit funds into their Coinbase accounts. This feature was launched toward the end of September. When an employer uses one of the many major payroll processing companies, direct deposit can be set up digitally, eliminating the need for any paper forms to be printed and mailed. This eliminates the administrative burden placed on the employer. This is due to the fact that the procedure can be finished completely online. After that, they will be able to calculate the proportion of each paycheck or the total amount that should be converted to bitcoin or another cryptocurrency.
The underlying procedure has not undergone any kind of revision or modernization as of late. Customers of brokerage firms like Vanguard and Fidelity have the ability to make direct deposits from their paychecks into their brokerage accounts through the use of services provided by those firms. Sometimes, a single paycheck will be deposited into a number of different bank accounts, or it may be divided between a checking account and a savings account at the same bank. Another possibility is that the money will be split between two accounts at the same bank.
If you are already familiar with purchasing cryptocurrency on your own, the new option may sound familiar to you; however, there will be some additional steps involved in using it. One of the users on the r/Bitcoin subreddit posted the following message in November of 2013: “In my opinion, it’s probably just marketing.” “Oh, this well-known figure in the world of sports is promoting some random cryptocurrency exchange while also being paid in Bitcoin. That’s interesting. If his followers followed his lead and made purchases of bitcoins at the exchange, the company’s revenue may have the potential to increase as a direct result of these actions.”
That assertion is absolutely correct, and it contains a great deal of relevant information. The sheer volume of transactions that take place on cryptocurrency exchange platforms is the primary driver of revenue for these marketplaces.
On the other hand, cryptocurrency exchanges are currently engaged in a cutthroat competition with one another, which is very comparable to the competition that exists between traditional banks for customers. To illustrate this point, let’s say that you want to buy cryptocurrency through Coinbase. If you link your bank account to the exchange, you will be subject to a fee; however, if you use direct deposit, you will not be subject to this fee. When you sell bitcoin, you will still be required to pay the associated transaction fees. This is because the individuals known as “miners” who are in charge of adding your transaction to the blockchain do not do so without being compensated for their work. This is always the case, regardless of which exchange you use or even if you use bitcoin at all. It does not make a difference.
As an alternative to relying on a cryptocurrency exchange in order to carry out a predetermined purchase, why not give market timing a shot as a way to hedge
against potential losses? Author and investor Ken Fisher once stated in a piece of writing that “time in the market beats timing the market—almost always.” You probably did not want to hear an answer like this one, but here it is.
Consider the fact that the value of a single bitcoin was approximately $41,000 at the time that this article was written. Every person who bought bitcoin in 2018, whether it was on January 5 at $17,089 or on December 14 at $3,183, is now wealthier than they were before they made their purchase. This is especially true for those individuals who have made consistent purchases throughout the year and who have bought bitcoin at various prices throughout the course of the year. This demonstrates perfectly how effective dollar-cost averaging can be in certain circumstances.
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On the other hand, getting paid in cryptocurrency is not the same as making a tax-free deposit into a 401(k) or another type of retirement account (k). Because your automatic cryptocurrency purchase is deducted from your paycheck after taxes have already been taken out, there will be no impact on the amount of income that is subject to taxation as a result of this. This is because taxes are deducted from your paycheck before your automatic cryptocurrency purchase is. If the value of your bitcoin investment has increased, any profits that you take out of your bitcoin wallet or convert back into dollars will be subject to taxation.
This is because the Internal Revenue Service treats bitcoin as property and not as currency. On the other hand, for some people (including myself! ), the fact that spending bitcoin is pricey, which is comparable to the expense of withdrawing money from a retirement account early, is a feature, not a bug. This is because spending bitcoin is comparable to the expense of withdrawing money from a retirement account early. This is due to the fact that spending bitcoins helps to maintain the currency’s overall value. Another user on the r/Bitcoin subreddit voiced their opinion that encouraging frugality by making it simple to save money while simultaneously increasing the difficulty of spending money would lead to overall lower levels of spending.
Furthermore, if you believe that Bitcoin has already reached its maximum value, what are your plans moving forward? I’m not going to waste any more of your time trying to persuade you otherwise. I’ve already made up my mind. However, I
will say that it is simple to dabble in cryptocurrency without falling for the hype that it will one day replace the dollar. I will say this because it is easy to dabble in cryptocurrency. I’m going to say this because it’s not complicated. The process calls for less and less effort to be put in as each day passes by.