Best Way To Calculate Crypto Taxes – Cryptocurrencies bring together four main groups: investors, traders, miners and thieves. As the crypto space gains more and more attention, tax authorities are knocking on doors and starting to discuss the need for crypto traders and investors to pay taxes.
Then I realized: Ah, so Benjamin Franklin was right when he said that nothing is certain in this world, except death and taxes.
Best Way To Calculate Crypto Taxes
As a crypto trader and investor, you must pay taxes on your crypto income. Otherwise, the tax collectors will come after you.
Best Free Crypto Tax Software In 2023
Just like you, I had the same headache when I realized I had to start reporting my crypto activity for taxes.
As a guide, I created this simple yet resourceful article to help you navigate the crypto tax space.
Whether you need to pay taxes on your cryptocurrency activity depends on where you are located. Crypto taxes are a serious topic when you live in the US, Australia, UK, Japan, and France.
The table below shows countries with cryptocurrency tax rules, how they classify cryptocurrencies and the type of tax you have to pay as a trader.
How To: Calculate Your Crypto Taxes
Living in any of the aforementioned countries doesn’t mean you pay taxes on every cryptocurrency you hold under the sun. These cryptocurrency trading and investing activities require you to pay taxes. These activities include almost all countries.
Not all cryptocurrency liabilities are taxable. Here are activities you don’t pay tax on:
The amount of tax you pay on crypto liabilities depends on the activities you engage in. (This is mostly based on IRS tax rules).
Different countries tax cryptocurrencies in different ways. Consult your local CPA for accurate tax reporting and filings. Help your tax professional report your exchanges and private wallets with this cryptocurrency tax tool.
Crypto Tax Us: Ultimate Guide 2023
Buying and holding a crypto asset and then selling it at a future date incurs capital gains tax. For example, if you buy Bitcoin for $10,000 and sell it for $13,000, you must pay capital gains tax on the gain, in this case $3,000. However, the percentage of crypto capital gains tax you pay depends on whether you have held your crypto assets for less than a year or more than a year.
This brings us to the two taxes in this category: short-term and long-term capital gains taxes (this section focuses on capital gains taxes, as crypto activity is currently dominated by buying and selling). However, keep in mind that there are other activities that are taxed, such as purchases made with cryptocurrencies or when you pay in cryptocurrencies for services rendered, etc.).
If you sell your crypto assets for a profit after holding them for less than a year, you are liable for short-term capital gains tax. In the U.S., the percentage of short-term capital gains tax you pay depends largely on whether you are single, married, or head of household. The table below summarizes the tax rates and different percentages for each group.
For cryptocurrency traders in the United States, the IRS has a full list of tax rates applicable to short-term traders and investors.
Crypto Tax 2021: A Complete Us Guide
When you make a profit by selling your cryptocurrency after holding it for more than a year, you are liable for long-term capital gains tax. The table below illustrates the tax rates for long-term owners.
Essentially, long-term capital gains are taxed at lower rates than short-term capital gains, which is more beneficial to traders and investors. Therefore, the tax system rewards those who hold assets for a long time. Hold on dear life.
If you are a cryptocurrency trader in the UK, you are responsible for paying capital gains tax or income tax depending on your cryptocurrency activity. Buying and selling cryptocurrencies is subject to capital gains tax, while accepting cryptocurrencies as payment for services rendered or income from mining activities is subject to income tax.
You are exempt from tax if you earn between £0 and £12,500 from your crypto activities. For traders earning between £12,501 and £50,000, you will pay 20% of your cryptocurrency earnings. HMRC’s policy paper details the nature of cryptocurrency activity and taxation in the UK.
How To Calculate Crypto Taxes
So far, you have learned about cryptocurrency taxes in your country, how to determine the taxable income of your transactions and investments, and the tax rates that apply to your activities.
This part of the post will take you through 5 crypto tax software that you can use to import and manage transaction data from crypto exchanges, as well as calculate and report taxes on your crypto activities, all by yourself. Plus some bonus tools.
Let’s take a look at what each software can offer you when it comes to calculating and reporting your tax liabilities.
TokenTak is one of the most comprehensive tax calculation and reporting software available for any cryptocurrency trader. The platform makes the whole process painless by integrating with almost every cryptocurrency exchange. It also works with thousands of cryptocurrencies, so you don’t have to worry about your altcoins not being part of TokenTak’s billing and reporting dashboard.
Crypto Tax Guide Australia
If you are a cryptocurrency trader aiming to minimize losses and maximize profits, you will be amazed by the minimization algorithms that TokenTak offers. This feature will recommend selling coins to reduce the taxes you pay for your crypto activities and help you optimize your portfolio and tax regime.
Coinly is another great tool for cryptocurrency traders and miners who want to pay taxes. It supports traders, investors and miners in more than 100 countries. If you’re looking for a sleek portfolio tracker and crypto tax calculator, look no further than Coinly.
Coinley takes into account the accounting systems of all supported countries when calculating taxes. It makes reporting and calculating taxes simple no matter what country you are in. Even if your country is not listed, Coinley is ready to support you should you need help with your tax calculations. The best thing about Coinly is that it can generate country-specific tax forms such as Form 8949 and Schedule D (if you’re in the US) or K4 (if you’re in Sweden) or capital gains summary (if you’re in the UK), etc. This means you can simply print the report and send it to the IRS instead of manually copying/pasting the numbers onto the form.
When it comes to exchanges, traders have a lot of options. It can also easily integrate with any merchant’s exchange or wallet using a secure read-only API connection. Coinly supports 68 wallets including Ekodus, Trezor, and Ledgers, more than 300 exchanges, and more than 6,000 cryptocurrencies.
Understanding Crypto Taxes
If you can’t find your exchange among the hundreds of exchanges Coinly supports, all you need to do is download and import a CSV or Excel file. Coinly can import such files without modifying them manually. Tracking your transactions and calculating taxes on Coinly is simple and easy.
CoinTracking is another great and long-standing tool for all cryptocurrency tax calculations and reporting. It is a crypto portfolio management platform that also offers excellent tax tools, allowing you to access a comprehensive set of data in one dashboard. It tracks your cryptocurrency and transaction milestones to help you make better decisions.
If you are a professional cryptocurrency investor in need of a reliable tax calculator, ZenLedger could be the perfect fit. It supports many exchanges, crypto assets and fiat currencies. ZenLedger’s dashboard is simple, making it easy for non-technical people to navigate the platform and calculate taxes smoothly.
CoinLedger is another great crypto tax tool for traders and investors looking for simple and intuitive crypto tax software. The user-friendly dashboard makes calculating and reporting taxes easy, even if you’re a beginner. In addition to tax tools, CoinLedger also has excellent cryptocurrency investment analysis tools to help you make better trading decisions.
Free Crypto Tax Calculator 2023 (online Tool)
Although cryptocurrencies are not banned in India, it is highly taxed. One of these rules is the 1% TDS rule, which means you have to pay an upfront tax in the form of TDS on all crypto transactions after you pass a certain threshold.
Meet Koink, a cryptocurrency taxation tool for Indian users that supports all major exchanges such as:
And much more… You can also integrate Koink with your wallet like Metamask or any other wallet and it will fetch data from different blockchains to create tax reports for you.
Crypto taxes are not that complicated. After compiling your crypto activity, the next step is to list your transactions on a resource provided by your country’s tax authority (IRS Form 8949 if you’re in the US). After that, you must transfer your gross earnings to Schedule D of your Form 1040 (same procedure for stocks).
How To Calculate Crypto Profit?
As cryptocurrencies become mainstream and governments begin to classify Bitcoin and cryptocurrency income for tax purposes, it is important to take care of your cryptocurrency income.
Also, if you know the cryptocurrency tax rules in your country, please do so