Avoid tax traps: how to sell bitcoin, coins, jewelry and paintings

Udo Reuss

Because there has been virtually no interest for years, many are looking around for alternatives. And some can be tempted to go into tangible assets, such as jewelry, antiques, coins, as well as gold, silver or even cryptocurrencies such as Bitcoins. The advantage: If these things increase in value, no capital gains tax is due on them, as for example on fixed-term deposits or shares.

On the other hand, these investments are very speculative – and taxes may still be due when you sell them: if you get rid of the valuables too quickly, you’ll have to pay income tax on the gain. And whoever gives the impression of acting commercially, the tax office demands sales tax and trade tax from him.

We have therefore summarized for you the pitfalls of selling private valuables:

1. speculation period of twelve months

If you own valuables such as precious metals, jewelry, antiques, works of art, classic cars, coin and stamp collections for more than one year, the sale is always tax-free. The same applies to bitcoins and foreign currencies. Buying and selling within twelve months, on the other hand, is a taxable private disposal transaction. Make a profit in a year of at least 600 Euro from all transactions of this kind, you have to pay income tax on it – on the whole amount, not only on what exceeds the 600 euros.

Tax is paid at your personal income tax rate. If you exceed the 600-euro limit, you must automatically file a tax return for that year. You enter the private sales transactions as "other income" in the tax return Annex SO a. If you don’t declare taxable profits, you could be in for tax evasion, or at least a more lenient "reckless tax evasion" charge.

If you make losses on the resale, you can offset that against your profits.


Image: Wolfgang Kumm dpa

2. What applies in the event of a loss?

As we said, such investments are speculative. Especially currencies and precious metals fluctuate strongly in value. In the last twelve months, the price of gold has fluctuated between 1.200 and 1.550 euros per troy ounce, that for Bitcoin even between just under 3.000 and good 12.000 euros. So you can also easily make losses.

If you sell within the one-year speculation period, you can reduce your taxes with the loss: Request with a cross on the jacket sheet of your tax return that the tax office should determine a loss, and hand in the completed annex SO.

You may only offset this loss against a profit from another private sales transaction. The good thing about this is that if you did not make any profits in the year, you can also offset the loss against profits from the previous year – or mark it against future profits. This is called a loss carried forward.

3. How to calculate a profit or loss

With foreign currencies or cryptocurrencies, it is often the case that you accumulate assets over a period of time. If you then debit an amount from your currency account, for example $100, then the question naturally arises as to which $100 you spent. The ones you paid in at the very beginning, or the ones that may have come into the account just a month ago.

The answer: the IRS assumes that you spend the $100 you deposited at the very beginning. The method is also called "first in, first out" (Fifo method). Realize that you are not just selling your dollars or bitcoins by exchanging them back into euros. Even if you pay something with it, it is in fact a sale on which taxes may be due within the speculation period.

So, to calculate the profit, you can’t avoid noting the time of each purchase and sale, the number and price of the coins, and the fees. In the meantime, there is software that helps with this.

You can deduct acquisition costs and fees from the price gain – as well as other income-related expenses.

4. Selling commercially

Through portals such as Ebay, Rebuy or classified ad websites, it is also easy to sell valuable things. The boundaries from private to commercial sales are blurred there. Tax investigators regularly search online portals for commercial traders who do not pay taxes. Indications for this are them elaborate presentation, frequent sales, a lot of new goods and if you sell for third parties.

It can be problematic, for example, if you sell a lot of value after an inheritance. Or if you dissolve a large collection. In principle, the sale of a coin collection, for example, is considered to be the last act of the collecting hobby. However, if you take the opportunity to sell off your friends’ coin collections, it becomes difficult.

If it is business, then you must declare the business income in the income tax return. The costs for the sale are deductible as business expenses.

In addition, you also have to register a trade and Business tax return submitted. If the profit for business tax purposes remains below 24.500 euros, no trade tax is due. If your income is permanently below 17.500 euros remain, you also do not have to pay sales tax.

However, as long as you only sell things for everyday use, there are no problems. By the way, this also includes the car.

5. Special case Bitcoin: Mining

Some earn virtual money by "mining" (prospecting), for example bitcoins. They provide computing power to solve complex mathematical problems, generating bitcoins. As a reward they then receive Bitcoins.

If the taxpayer engages in mining more often and with the intention of making a profit, the tax office may consider such activities as Commercial activity classify.

Udo Reub

Tax editor at Finanztip Verbraucherinformation GmbH – a company of the Finanztip Stiftung, Berlin. Previously, the business graduate with a focus on tax law worked for various business and trade publishers such as Handelsblatt, F.A.Z.-Verlagsgruppe, Haufe-Lexware and Vogel Business Media – 14 years of which he worked as editor-in-chief of trade magazines. From the complex tax law Udo pulls the relevant rulings for tax savers.

Udo Reuss

Status: 8. November 2019

Tax editor at Finanztip Verbraucherinformation GmbH – a company of the Finanztip Stiftung, Berlin. Previously, the business graduate with a focus on tax law worked for various business and trade publishers such as Handelsblatt, F.A.Z.-Verlagsgruppe, Haufe-Lexware and Vogel Business Media – 14 years of which he worked as editor-in-chief of trade magazines. From the complex tax law, Udo draws the relevant rulings for tax savers.


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