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Crypto Cashback Rewards & Taxes: What You Need To Know?

Crypto cashback rewards mean receiving a portion of the purchase a person made back in cryptocurrency.  Usually, cashback rewards are received in traditional money. This scheme allows you to exchange rewards or even get rewards directly as assets like Bitcoin and Ethereum. In this article, we shall discuss various rewards, if they are taxable, and more. 

Crypto Cashback

Crypto Cashback Taxes

For those who are not familiar with crypto cashback, they mistake crypto cashback for crypto rewards. Even though both help the user earn cryptocurrencies, crypto cashback is simply receiving a portion of the money back in cryptocurrency, and staking involves actively participating in a trading network by locking up their crypto and earning rewards for the contribution. 

How to Choose the right Cashback Card?

There are many features in cashback cards to look for. Some main features are as follows:

1. Cryptocurrencies Available

The first thing to look for in a cashback card is the cryptocurrencies supported in the card that you want to apply for. Some cards will only have one type of cryptocurrency, while many other platforms offer more than two cryptocurrencies. The percentage of returns you receive will also depend on the purchases the user made. 

2. Percentage of Cashback

One of the main things looking for a cashback card is obviously the percentage of cashback the card offers. The best crypto cashback card is said to offer 1% to 5% depending on the card and transaction type. Some cards even offer higher returns for payments made in certain stores or other company products as well. 

3. Security Features

Choose a cashback card that offers two-factor authentication, encryption, and the ability to lock or freeze the card in an instant through the app involved in the card. If the card you are thinking of using does not offer these features, it is best to look for one that does have all these so that in case of fraud or even theft, the user could take action individually rather than involving an intermediary.  

4. Transaction Fee

Transaction fees often eat away at your profit if the platform fee is not calculated. Many crypto cards charge fees for things, so it is important to look for them. Fiat currency is what may be used in a transaction. 

How it works?

Cashback cards could be linked to a user’s digital wallet. If not, a user could link their crypto cards to their wallet or fund the crypto cards with digital assets or even fiat currency. From these cards, users can make purchases just like with a debit card. With each purchase made, the user will be able to earn a percentage of the transaction back in cryptocurrency. 

Types of Cashback Rewards

There are different types of cashback schemes offered in crypto cashback cards. 

  1. Registration Rewards
  2. Referral Rewards
  3. Lockup Rewards
  4. Credit Card Rewards
  5. Non-taxable Rewards
  6. Crypto-back Rewards

Are Crypto Cashback Cards Taxable?

It is crucial to check the regulations of your area or country regarding tax obligations when using a crypto cashback card. Crypto cashbacks and rewards are considered taxable income in many countries, as many places require their citizens to report them on tax returns. Since most crypto cards can be used for international transactions, there may even be transaction fees involved in currency conversion costs. All users should also be aware that they will be subject to the capital gain tax regime when they sell the asset.

The tokens will most likely be treated as acquired for Nil value and there will be a capital gain when they are disposed of. But one thing to be self-aware of is that the value of the currencies is volatile but the taxes deducted will remain the same. The referral bonuses are straightforward though; they only count as an additional income from a tax perspective. If the rewards you receive are in cryptocurrency, you have to identify the fair market value of that crypto during that day, which is calculated for the additional income you had.  

Conclusion 

As cryptocurrency continues to grow in mainstream adoption, the future of crypto cashback has great potential. In the future, we could see more flexible and rewarding cashback programs according to the needs of digital asset holders. Defi integrations and multi-currency support are also expected to make these cards grow even more attention worldwide. A higher adoption is expected to happen in the near future and with this, we could also expect higher security and, of course, an increased percentile of rewarding options. 

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