If you’re dealing with bitcoin or any other crypto on a regular basis, chances are you’re selling it for fiat currency fairly often. You need to understand the tax implications of selling crypto for your tax return.
Selling crypto for fiat currency - whether that’s USD, GBP, AUD or CAD - is probably one of the most regular transactions you’ll make as a crypto investor.
With tax offices around the world from the IRS to the ATO taking a strong stance on crypto taxes, you need to know the tax implications of selling crypto - like do you pay tax when selling crypto and if so, what tax applies?
Fortunately, it’s all pretty straightforward.
Are crypto sales taxed?
If you’re selling crypto for any fiat currency, you’ll need to pay tax. It doesn’t matter where you live, almost every tax office worldwide has taken the same stance on this.
This comes down to how cryptocurrency is viewed by tax officials. Though currency is in the name, crypto isn’t seen as a currency. Instead, it’s seen as an asset - much like a share or a rental property.
So when you sell cryptocurrency for fiat currency, this is seen as a disposal of an asset from a tax perspective. You’re selling your asset and making a profit or loss.
What is the tax on selling crypto?
Because cryptocurrencies are seen as an asset, it doesn’t matter whether you’re selling Bitcoin, Ether or Cardano - it’s all seen as the same. It’s all subject to Capital Gains Tax.
As we mentioned above, when you sell your digital asset, you’ll be making a profit or loss. This is also known as a capital gain or capital loss, due to the tax it’s subject to.
If you make a capital gain when you sell your crypto for fiat, you’ll pay tax on the profit you made. You calculate this by figuring out your cost basis (the original price you paid for the asset plus any fees) and subtracting that from the price you sold the asset for. The difference is the only part you’ll pay tax on.
The amount of tax you’ll pay on capital gains will vary depending on where you live, how much you make in regular income and how long you’ve held the asset for.
If you make a capital loss when you sell your crypto for fiat, you won’t pay tax on it. You can, however, offset your capital losses against your capital gains in many countries. This lets you reduce your tax bill.
You can find out more about how this works in our Capital Gains Tax guide, as well as find out more about the exact Capital Gains Tax rate you’ll pay in the following country guides:
Are there taxes on selling crypto for crypto?
So now you know you pay tax on selling crypto for fiat currency, but what about tax if you sell your crypto for another crypto?
In most countries, this is still seen as a disposal of an asset. You’ll have a gain or a loss and this will be subject to Capital Gains Tax as such.
There are some exceptions to this rule. For example, France only taxes crypto when you sell it for fiat currency, not for any other cryptocurrency.
All this said, there are other crypto transactions that the vast majority of countries view as a disposal and subject to Capital Gains Tax. Disposals include:
- Selling your crypto for fiat currency.
- Swapping your crypto for crypto.
- Spending your crypto on goods or services.
- Gifting your crypto (in most countries).
How to report the sale of crypto on taxes?
Whether you’re reporting the sale of Bitcoin on taxes or any other crypto - the process works in a similar way in most countries.
You’ll need to report any crypto sold for fiat currency as a capital gain or loss. Each country does this a little differently, but in general you’ll do this in your annual tax report. Some countries let you include this in the standard tax forms and others ask that you fill out a separate Capital Gains Tax form.
The great news is with crypto tax software reporting the sale of crypto to tax authorities is easy.
How Koinly deals with crypto sales
Koinly makes reporting your capital gains and losses hassle free. All you need to do is sync the wallets and exchanges you use with Koinly through API or CSV file import. Then Koinly works its magic in the background to calculate your crypto taxes. It can identify when you’ve sold crypto and calculate your cost basis and your capital gain or loss and will do this for all your transactions.
Once Koinly has done the math, all you need to do is head over to your tax reports page where you’ll find an easy to read summary of your crypto taxes, including your capital gains or losses from selling crypto.
You can also download country specific tax reports, ready to submit to your tax authority. For example, the HMRC Capital Gains Summary or the IRS Form 8949 & Schedule D.
- When you sell crypto for any fiat currency - you'll pay tax.
- This is seen as a disposal and subject to Capital Gains Tax.
- You'll pay tax on any profit you make from selling crypto.
- You won't pay tax when you make a loss when selling crypto.
- The amount of Capital Gains Tax you'll pay depends on where you live and how much you make.
- There are other disposal transactions including swapping, spending or gifting crypto.