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Top 3 tips to remember when calculating your crypto taxes

06 Mar 2019   #Bitcoin

While cryptocurrencies are still waiting for a proper regulatory framework that would increase the investors' and traders' safety during their work with digital coins, paying taxes is already a reality, even when it comes to Bitcoin and other digital assets. In fact, it became a priority for US citizens in 2018, after the IRS announced that their major focus would be on taxation of virtual assets back in July.

The law currently sees cryptocurrencies as property, making them subject to rules regarding capital gains and losses. In this regard, they are the same as any other type of property, including bonds, stocks, real estate, and alike. However, the difficult part is that all of the data regarding crypto users' trades, investments, gains, and losses, is scattered throughout the space.

To properly calculate their taxes, crypto holders need to collect information from multiple exchanges and wallets. Additionally, they must include all of their purchases and sales, trades, mining income, transfers, but also air drops, forks, and splits, as well as any other type of activity. This can be quite a difficult task, which is why we have prepared three useful tips in regards to tax calculations.

Record everything

As mentioned, the biggest issue is collecting the data after an entire year of trading and investing. During this time, crypto users have likely gone through a number of exchanges and wallets, making it quite a chore to gather all of that data. What's more, users need to know the prices of coins at the time of conversions, purchases, sales, and alike.

All of this can take a long time to collect and recollect, which is why it is best to record this data right away. As soon as an action involving crypto is completed, users should write it down, as well as all the details regarding the action, such as the amount, the price, as well as time, date, and location.

Learn how calculating gains and losses works

According to the current laws, whenever you make gains through trading, you owe taxes on those gains. This is why it is important to calculate your gains, as well as taxes, precisely.

You can do this by using a formula that goes like this: Fair Market Value – Cost Basis = Capital Gain / Loss

In this case, Fair Market Value is the price you can get for a certain asset in an open market. Simply put, it is equal to the coin's value at the time of the sale. Cost Basis, on the other hand, is the asset's original value, and it is needed for tax purposes. In other words, this is the amount you pay to purchase the coin.

This allows you to calculate your gains and losses for each trade, but to do it properly, you need to know the coins' value at the time of sale/purchase.

This seems rather straightforward, and in some cases, it may be. However, for some traders, the situation is more complex, which is why the best course for action for them might be to hire a tax specialist who is familiar with crypto.

Report your losses

Making gains puts you in a position where you owe taxes to the government. However, if you are experiencing losses, you can actually reduce the taxes due to the lack of profit. Because of this, it is of great importance not to forget your losses, and report them just the same. It will save you money, and your taxes will get somewhat lower.


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Top Cryptocurrencies with Price Predictions

# Crypto Prediction Accuracy CVIX Price 24h 7d Market Cap Volume 24h
1 Bitcoin (BTC) BTC Bitcoin predictions 81.2% 35 $43 081.91 1.35% -8.98% $811 087 159 268 $32 566 242 601
2 Ethereum (ETH) ETH Ethereum predictions 72.8% 49 $2 973.82 2.01% -10.60% $349 960 860 996 $21 587 502 761
3 Cardano (ADA) ADA Cardano predictions 62.4% 80 $2.27 -2.69% -2.67% $72 581 341 919 $5 657 027 599
4 Tether (USDT) USDT Tether predictions 93.2% 1 $1.000723 -0.06% 0.06% $68 592 541 921 $78 405 017 855
5 Binance Coin (BNB) BNB Binance Coin predictions 66.4% 69 $342.55 -2.18% -15.33% $57 594 887 329 $1 834 859 342
6 XRP (XRP) XRP XRP predictions 72% 52 $0.942011 0.16% -11.07% $44 008 512 090 $3 471 846 458
7 Solana (SOL) SOL Solana predictions 66.8% 73 $134.99 -3.62% -13.48% $40 130 984 296 $2 394 353 078
8 USD Coin (USDC) USDC USD Coin predictions 92% 1 $1.000373 -0.04% 0.04% $30 961 410 947 $3 802 192 647
9 Polkadot (DOT) DOT Polkadot predictions 67.6% 69 $29.14 -4.71% -12.32% $28 777 972 657 $2 530 767 375
10 Dogecoin (DOGE) DOGE Dogecoin predictions 62% 77 $0.204356 -1.83% -12.96% $26 862 009 468 $1 490 518 775
11 Avalanche (AVAX) AVAX Avalanche predictions 61.2% 87 $67.41 -4.29% -4.38% $14 849 661 345 $1 216 715 313
12 Terra (LUNA) LUNA Terra predictions 69.2% 59 $36.08 -4.62% 4.12% $14 432 557 786 $1 639 919 020
13 UniSwap (UNI) UNI UniSwap predictions 65.6% 74 $22.79 17.61% -3.84% $13 937 536 203 $1 041 192 676
14 Binance USD (BUSD) BUSD Binance USD predictions 94.4% 1 $1.000271 -0.06% 0.03% $13 693 035 619 $5 465 909 777
15 Chainlink (LINK) LINK Chainlink predictions 67.2% 70 $24.73 9.02% -10.79% $11 252 316 912 $1 925 712 695

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