Wondering how on earth to work out your crypto taxes? Or how to file your crypto tax at tax time? Koinly explains it all in this quick guide on how to file your crypto tax.
Worried about how to report your cryptocurrency taxes? The good news is, filing your crypto taxes is probably a lot easier than you think. That's because crypto tax calculators like Koinly do all the tricky calculations for you - leaving you with only one job. That is, to share your crypto tax report with your accountant, or file via a tax app like TurboTax, TaxAct or H&R Block, or online using your governments tax portals. Let's look at how to file your crypto taxes in 5 easy steps:
Connect your wallets and exchanges to a crypto tax calculator like Koinly.
This is the easiest part! By connecting all of your cryptocurrency wallets, exchanges and blockchain addresses to Koinly, you can sit back and relax while Koinly calculates your crypto capital gains, capital losses, income and expenses. Koinly supports 600+ exchanges including Binance, Coinbase, Bittrex and more.
Forget about creating your own complex spreadsheets and downloading tons of statements and reports. Simply connect your exchanges to Koinly via either an API integration, or by uploading a CSV file of your trades.
Let Koinly calculate your capital gains, losses and income.
Once all your data is imported, Koinly gets to work on figuring out which of your crypto transactions are taxable, and which are not.
Koinly will be looking for transactions that resulted in a capital gain, a capital loss, and transactions that look like income. That's because crypto can be taxed as both Capital Gains Tax and Income Tax, depending on how the transaction happened.
Capital Gains Tax?
Crypto is classified as property in most countries, and property is an ‘asset’ for tax purposes. An asset gets taxed when it's 'disposed'.
A capital gain is the profit or loss you make from selling, swapping or spending any asset, including crypto:
Capital gain = selling price - buying price - fees
Your buying price + associated fees are also known as the cost-basis or just basis in accounting lingo.
For example, if you bought 1 BTC for $1,000 USD and also paid a fee of $10, then your cost basis is $1010. If you later sell the bitcoin for $1,500 then you will realize a capital gain of $1,500 - $1,000 - $10 = $490. You will have to pay a capital gains tax on this amount.
Koinly is able to spot trades that are subject to Capital Gains Tax (CGT) so you won't need to worry about this. In case you're wondering, in most countries you could pay CGT on your crypto disposals in these situations:
- Selling: Profits from selling crypto for fiat currency.
- Swapping: Profits from swapping crypto with crypto.
- Spending: Using cryptocurrency to purchase goods and services.
- Gifting*: Perceived profits made from gifting crypto.
Gifting is taxed in Australia, Ireland in the UK, unless the crypto gift is given to a spouse or civil partner. In the US, gifting crypto is tax-free, provided that your crypto gift does not exceed $15,000 in value.
Long term gains vs short term gains?
Koinly also checks out which of your gains can be taxed as short terms gains, and which can be taxed as long terms gains - usually at a more favourable tax rate.
- After 1 year: USA applies a reduced capital gains tax rate from 0%, 15% or 20% tax depending on individual or combined marital income.
- After 1 year: Australia allows a 50% capital gains discount.
- After 1 year: Germany does not tax capital gains on crypto.
As you can see, long term gains can drastically reduce your tax bill. Using Koinly to track your holding period is a massive tax advantage.
Just as your crypto disposals can raise a profit, they can also introduce a loss. Most countries allow investors to carry their capital loss forward, to offset against capital gains in later years. Koinly can track this for you, potentially saving you on future tax bills.
Just as income can originate from work or investments and be taxed under Income Tax, so too can crypto income. Cryptocurrency transactions that are classified as income are taxed at your regular Income Tax bracket. Remember, the day that you dispose of the crypto income you earnt you will very likely be up for Capital Gains Tax. A crypto tax calculator like Koinly will spot crypto income from:
- Getting paid in crypto - like a salary.
- Staking rewards and liquidity pools - like dividends.
- Forks - excluding soft forks when no new coin is received.
- Mining tokens - like income.
- Airdrops - like bonuses.
- DeFi interest - like bank account interest.
- Referral bonus - like commission.
You won't pay taxes on certain crypto transactions, like buying or donating crypto. However it's very important to use a crypto tax software like Koinly to track this for you, as some tax-free crypto transactions can 'look' like gains, and will thus be taxed.
Koinly will spot tax free transactions like:
- Buying crypto
- Receiving crypto as a gift
- Donating crypto
- Give crypto as a gift (not the case in UK, Australia, Ireland)
- Moving crypto between wallets
Download your crypto tax report
Here's where the going gets really good. Once it's tax time, simply download the right tax report for your country from Koinly's menu of crypto tax reports. You'll then be able to file your crypto taxes easily - and safely - knowing that you have all your crypto trades accounted for.
Each tax office has a slightly different process for this, as well as different tax deadlines. You can learn more about your country's crypto tax rules in our regularly updated country guides.
File yourself, online
Are you a DIYer at heart? Then you'll want to file your crypto taxes yourself. Equipped with your Koinly crypto tax report, it's pretty easy to file directly on your country's online tax filing platform, or via tax apps like TurboTax, TaxAct, and H&R Block.
US crypto taxpayers
Fill in Form 8949 and add it to Form Schedule D: Form 8949 is the specific tax form for reporting crypto capital gains and losses. The Schedule D form is the main tax form for reporting overall capital gains and losses. Fill in Schedule 1 Form 1040: Any crypto earned as an income needs to be added to Schedule 1 Form 1040.
Australian crypto taxpayers
File a Tax Return for Individuals Form: Capital Gains Tax and Income Tax are both reported under the same Individual Tax Return Form. You can do this online with MyTax.
UK crypto taxpayers
You need to report any gains from the previous year in your Self Assessment Tax Return.
Canada crypto taxpayers
Any cryptocurrency transactions subject to Capital Gains Tax can be reported in aSchedule 3 Form. Any cryptocurrency transactions subject to Income Tax should be included in your Income Tax Return T1. You can file your taxes online using the CRA'sMy Account.
File with your accountant
Alternatively, if your accountant does your taxes, you can invite them to view your crypto trades and tax report in Koinly. Grant your accountant access from your Koinly account settings. With a crypto tax report from Koinly it's easy for your accountant to file your tax return
Bonus answer: How much do you pay?
In most countries, the amount of capital gains tax owed on crypto depends on how long you’ve held your assets, and in which income tax bracket you are. Typically, the higher your income, the greater the percentage of tax you'll pay on capital gains. Check out our updated country guides to find out what your tax bracket is.