Calculating Taxes on Cryptocurrency Gains
It’s tax season and would like to help all beginners and experienced traders on calculating gains and filing taxes
As everyone knows, I’ve been writing on cryptocurrencies since few months and been helping beginners get up to speed and understand how to use certain exchanges, understand certain trading jargon and wrote few how to guides. Now it’s time to help the same traders and investors on how to calculate their gains, report them and file taxes appropriately.
Disclaimer: I am not an authorized personnel to provide any tax advice. For any specific questions & decisions, I would strongly recommend speaking with a tax professional.
I’ll soon be writing in detail on how to calculate your gains, how to leverage few tools available on the internet and report your gains appropriately. For the sake of optimism, I refer to gains — but losses also need to be reported and you can claim up to certain amount of losses in a given financial year.
Few common things to remember
- Trading cryptocurrency leads to gain or loss. This is considered as income in most of the countries. US, specifically considers this as capital gains and is taxable.
- There are 2 types of gains — short-term and long-term gains. Duration of ownership for above classification differs from country to country. In the USA, it’s short-term if you sell with-in an year, long-term if you hold more than an year.
- There are different ways to calculate your gains. One of the important factor here is to maintain consistency across your calculations. Couple of well known ways are FIFO (First In First Out), LIFO(Last In First Out), SpecID (Matching Specific Id). Whatever you follow, you should follow the same for the entire set of your calculations.
Currently working on compiling more information on this and look out for my next article on the necessity for a unified tool.
With this in mind, I’m also collaborating with an enthusiastic team who’s working on solving this problem of calculating gains on crypto currency trading and would definitely introduce them to you all soon. There would also be a give away for my readers who can be part of an early access program.
EDIT: Following are the details about the company I told about — BearTax
BearTax - Your Crypto Tax Assistant
Simple to use platform for crypto traders to import transactions, calculate gains and file taxes.
Also, a lengthy write up of why do we need such an assistant to help with filing taxes on cryptocurrency.