Crypto Taxes: How To Beat the IRS Deadline with Koinly
The tax deadline is looming and the IRS has made it very clear they expect crypto investors to pay their dues. You have until April 15, 2024 to file your annual tax return - including your crypto taxes. Koinly explains everything you need to know about how to file your crypto taxes before the deadline.
Completely lost when it comes to US crypto tax?
The IRS has made it clear that crypto is subject to either Capital Gains Tax or Income Tax, depending on the specific type of investment. But getting all the information you need to identify your taxable transactions, capital gains and losses, and crypto income isn’t always straightforward for active investors.
Fortunately, crypto tax calculator Koinly can help with all the tricky calculations and generate your crypto tax report for you. So all you need to do before the deadline is file your tax return using your preferred tax app or hand your crypto tax report over to your accountant.
Not sure where to start? You can learn everything there is to know about crypto tax in our Ultimate US Crypto Tax Guide... or if you're in a rush, here’s the crash course on how crypto is taxed and how to file your crypto taxes in 5 easy steps:
Crypto Tax 101
Crypto is classified as a property by the IRS, which dictates its tax treatment. You’ll either pay Capital Gains Tax or Income Tax on crypto depending on the specific transaction you’re making.
Capital Gains Tax?
You’ll pay Capital Gains Tax on any profit you make when you dispose of crypto. Disposals of crypto include:
Selling crypto for USD or any fiat currency.
Trading crypto for another crypto, including stablecoins.
Spending crypto on goods or services.
Put simply, a capital gain or loss is the difference in price from when you bought (or acquired) crypto and when you sold or otherwise disposed of crypto. If you have a profit, you’ll pay Capital Gains Tax on that profit. If you’ve made a loss, you can offset this loss against any gain to reduce your overall tax bill.
If you’ve held your crypto for less than a year, you’ll pay short-term Capital Gains Tax on your crypto, which will be the same as your Income Tax rate. If you’ve held your crypto for more than a year, you’ll pay the long-term Capital Gains Tax rate of between 0% to 20% based on your overall income.
Meanwhile, if you’re seen to be ‘earning’ crypto, your crypto will be subject to Income Tax instead. You’ll pay Income Tax at your regular Income Tax rate, based on the fair market value of your crypto in USD on the day you receive it. There are many instances when crypto may be subject to Income Tax, but some prominent examples include:
Getting paid in crypto in exchange for a service.
Earning interest on crypto.
Many DeFi activities where you earn new tokens, like staking, liquidity mining, and yield farming.
Remember, even though you’ve paid Income Tax on crypto it doesn’t mean you won’t pay Capital Gains Tax when you later dispose of your crypto.
Is any crypto tax free?
Some crypto transactions are tax free, including:
Buying crypto with USD.
Transferring crypto between your own wallets.
Gifting crypto (though you’ll need to file Form 709 if it’s over $16,000 in value).
Donating crypto to a registered charity.
Working through all your transactions and figuring out which are taxable, which tax treatment applies and your capital gains, losses, and income, is a lot of work for most investors. Fortunately, a crypto tax calculator like Koinly can help you get your crypto taxes done in five simple steps.
Connect your wallets to Koinly
Koinly supports more than 700 wallets, exchanges, and blockchains. In most instances, you can connect in minutes by using API or by uploading a CSV file of your transaction history with a given wallet.
It’s really important you connect every wallet, exchange, or blockchain you use. This is so Koinly can track your entire crypto portfolio and identify tax-free transfers between your own wallets and taxable transactions like sales or trades.
Let Koinly calculate your crypto tax
Calculating your cost basis or the fair market value of any crypto in USD on the day you received it.
Identifying your transactions and figuring out which are taxable and which are not.
Tagging your transactions to apply the correct kind of tax treatment (Capital Gains Tax or Income Tax).
Calculating your capital gains and losses, including separating short-term and long-term capital gains.
Calculating the fair market value of any crypto income in USD on the day you received it.
From here, Koinly will generate your crypto tax report.
Download your crypto tax report
Most American taxpayers agree the IRS hasn’t made crypto tax easy to file, but Koinly makes this simple. However you prefer to file - whether that’s with a tax app like TurboTax or TaxAct, through your accountant, or by post - you can just download the crypto tax report you need, when you need it.
File your crypto taxes
Once you’ve got your crypto tax report, you just need to file your crypto taxes in your preferred manner.
File with an accountant: give your accountant access to your Koinly account to review your crypto taxes and generate the report you need. Need an accountant? Find one in our crypto accountant directory.
File by post: attach your downloaded Form 8949 and Schedule D from Koinly to your Form 1040. If you’ve got crypto income, make sure to include your total income from your Complete Tax Report from Koinly on Schedule 1.
How much do you pay in crypto tax?
The amount you’ll pay in crypto tax will depend on your annual income and how long you’ve held your crypto for. In general, the higher your annual income, the higher percentage you’ll pay in Capital Gains Tax. You can find out how to calculate your crypto taxes in the ultimate US crypto tax guide.
And that’s it, crypto taxes are done in time for the deadline! To find out more about Koinly, check out this page.