Do you invest Nodes, Stake coins or Mine?
For those who have recently joined the Crypto world, words like Staking, Nodes and Mining may seem strange and alien as they don't follow the traditional approach of buying and holding.
For the seasoned investor who understands the Crypto world, you will no doubt want to earn more with your investments, rather than just wait for their value to increase in future. Well, let me tell you there are ways to generate passive income streams while your investments are being held.
Let me explain; much like buying a house in the real world, you would purchase a property (as your investment) and get paid rent from your tenants while they occupy the home. This is similar to nodes, mining and staking where the investments you hold pay you interest (rent) over the course of time they are being held.
Continuing with the example of the house, the traditional Crypto investor would buy a "property" and then sit on it until years down the line when it's worth more money. The difference between the price paid and sold would equal your profit and you would pay capital gains tax.
However, in the real world would you really buy a property and keep it vacant without getting tenants on board, waiting purely for the gains in the future once it goes up in value? I think the answer you're looking for is no, you would not. That's exactly what staking, mining and Node investments are designed to do; to give you rental income while you have money invested in Crypto Assets.
This is the point at which most investors fall short of their filing obligations. As with properties, rental income received from tenants is a form of trading income and is taxed accordingly. The same applies to those within the Crypto world; gaining any interest via the release of free coins or additional coins at no costs is effectively your rental income and is subject to Income tax rules. This is in addition to the capital gains tax you would pay on your investments once you have sold them.
If you need help and advice organising your portfolio so you're not caught out, I would recommend a free consultation with our experts to determine what support you need. Book your call today.