U.S. TAX GUIDE IN CHILE

How do I report capital gains from stocks, shares, and crypto on US taxes?

When it comes to capital gains that aren’t tied to property—things like stocks, shares, or even cryptocurrency—the IRS has specific rules you need to follow. 

If you’re a US citizen living in Chile, you’ll still need to report these gains on your US tax return, even if the investments are held abroad.

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What are capital gains, and how are they calculated?

Capital gains are pretty straightforward. If you sell an investment for more than you originally paid for it, you’ve made a capital gain. If you sell it for less, that’s a capital loss.

Here’s a simple formula for calculating your capital gain:

  • Cost basis: This is what you paid when you bought the asset.
  • Sale price: The amount you received when you sold the asset.
  • Capital gain or loss: Sale price minus the cost basis.


For example, let’s say you bought US$5,000 worth of stock and later sold it for US$8,000. Your capital gain is US$3,000. Simple, right?

But once you’ve figured out the gain, there are a couple of different ways the IRS taxes this money.

What’s the difference between long-term and short-term gains?

The IRS taxes long-term and short-term capital gains differently.

  • Long-term capital gains: If you’ve held the investment for more than one year before selling it, you qualify for lower tax rates. The rates could be 0%, 15%, or 20%, depending on your total income.
  • Short-term capital gains: If you sold the investment after holding it for less than a year, the gain is taxed at your ordinary income tax rate, which is often higher.


What if I sold at a loss?

If you sell an investment and take a loss, the IRS lets you use that loss to offset your gains. There are two ways this works:

  1. Offset against other gains: If you’ve sold other investments at a profit, you can use your loss to reduce the taxable gains. For example, if you lost US$2,000 on one investment but gained US$3,000 on another, your taxable profit would only be US$1,000.
  2. Carry forward the loss: If your losses exceed your gains, you can carry the loss forward to future tax years. This helps reduce your tax bill in later years when you might make gains.

How is cryptocurrency taxed?

Cryptocurrency—like Bitcoin or Ethereum—is taxed similarly to stocks and shares. Anytime you sell, trade, or even use cryptocurrency to buy something, it’s considered a taxable event by the IRS.

  • If you bought crypto and are simply holding it, there’s no tax due until you sell or trade it.
  • If you bought Bitcoin for US$10,000 and later sold it for US$20,000, the US$10,000 profit is a capital gain. Just like with stocks, long-term and short-term tax rules apply depending on how long you’ve held the cryptocurrency.

What happens if I paid tax in Chile?

If you’re living in Chile and have investments there, you might have paid Chilean taxes on any gains. The good news is, thanks to the Foreign Tax Credit, you can offset the taxes you paid in Chile against your US tax bill.

How do I report capital gains to the IRS?

To report your capital gains (or losses) to the IRS, you’ll need to use Schedule D (Capital Gains and Losses) along with Form 1040. 

You’ll also need Form 8949 to report individual transactions—this is where you detail every sale or trade you made during the year, whether it’s stocks, shares, or crypto.

  1. Calculate your gains or losses: Determine how much profit or loss you made on each investment.
  2. Separate long-term and short-term gains: Identify whether the gain qualifies for the lower long-term rates or is taxed at ordinary income rates.
  3. Claim foreign tax credits: If you paid taxes in Chile, be sure to apply for the Foreign Tax Credit to reduce your US tax liability.
  4. File the forms: Use Schedule D and Form 8949 when filing your US tax return to report all your capital gains and losses.

Do I pay both US and Chilean taxes?

While it’s true that you might owe taxes in both countries, the Foreign Tax Credit helps you avoid paying the full amount twice. Typically, you’ll pay tax in Chile first, and then use the credit to reduce what you owe to the IRS. 

In some cases, this can completely wipe out your US tax liability.