Your personal finance questions – What are the tax implications if I profit from cryptocurrency?

Q What do you think of cryptocurrencies? What if I profit from buying and selling cryptocurrency, what are the tax implications?

A Cryptocurrencies aren’t currencies at all, according to Frank Conway, founder of financial wellness provider MoneyWhizz and a qualified financial advisor. He says these are high risk investments.

The definition of money is that it must meet three basic criteria: the unit of account, the store of value and the medium of exchange. Cryptocurrencies don’t answer all three, he says. Cryptos are unregulated and if you take the best-known, Bitcoin, its origin is both mysterious and environmentally devastating, Mr. Conway says.

At the base is a very expensive “mining” process where the blockchain is used. The blockchain is a growing list of records, called blocks, which are linked together using cryptography. He said that, as with all high risk investments, you have to take into account the possibility of total loss of the invested capital.

Regarding taxation, the capital gains tax of 33pc applies. Mr Conway said it was curious from an Irish tax perspective that the tax on trading profits from high-risk cryptocurrency was lower than the exit tax on managed funds, which still stands at 41%. He said cryptocurrencies are an area that needs further examination and reform, especially now that more people will need to consider investing to limit the impact of inflation.

Q Like many workers, I had to switch to remote work last year. We have renovated part of our living room and a small bedroom to make it a functional office space. Is there any financial support that we can request retroactively to help cover the costs? It looks like there should be, because we wouldn’t have had to do this without the pandemic.

A The Home Renovation Incentive Scheme (HRI) used to cover this type of home renovation, according to the tax official Marian Ryan. She says this has enabled homeowners, as well as landlords and tenants from local authorities, to seek redress for renovation or improvement work done on their main home or rental property, beyond a eligible amount. However, the program ended in 2018 and claims are not eligible for work done or paid for after December 31, 2018. Ms. Ryan says other home-focused grants primarily support home renovations to increase the BER. (Building Energy Rating) and Energy Efficiency. In addition, a new grant to support adaptation of housing for the elderly and disabled was recently announced. However, these do not cover the types of jobs that many households across the country have had to do in response to the need to work remotely. Ms. Ryan would like to see the reintroduction of the HRI so that workers can benefit from this significant tax break. People who have made renovations, repairs or improvements to their home up to the 2018 deadline can still claim a tax refund on qualifying expenses, if they haven’t already done so.

Q After many virtual tours of the house, my husband and I are in the process of purchasing our first house. I thought we should have a joint life mortgage protection policy. However, our financial broker recommends instead setting up our policy on the basis of a double life. I am concerned about the additional cost this might cost. Our broker says it offers more protection, but is it worth it?

A Traditionally, there was only one way to set up mortgage protection as a couple, on the basis of living together, says Sara Murphy of the protection company Royal London. He would cover both people on the mortgage and if one person died he would pay the policy amount and the policy would end. However, as recommended by your broker, it is also possible to set up your mortgage protection as a double life policy. It also covers both people on the mortgage, but the main difference is that the policy would pay for each death whether or not they occur at the same time, she says. The good news is, this option doesn’t have to cost you more. She said Royal London offers double life mortgage protection for the same premium as joint coverage. Take note to review your mortgage protection coverage in a few years. There is currently a competitive market among providers, so you may be able to benefit from cheaper premiums. But you’ll never know unless you check it out, Ms Murphy said.

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Johnnie Gross

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