If you have bought/sold crypto currencies across various exchanges , you would realize by this time it’s incredibly hard to keep the books straight.
Here is typical trader cycle :
- Deposit $1000 to coinbase
- Bought BTC with USD in coinbase
- Transferred to Binance bought ADA with BTC
- Sold ADA to ETH in Binance
- Transferred ETH to Bittrex and bought XRP with ETH
- and the cycle goes on …..
Photo by Chris Liverani on Unsplash
At the end of the day common questions you would end up is
- How much did I buy X with Y ?
- Am I overall at a loss/gain ?
- Since Crypto currency gains are considered as capital gains how to calculate gain loss for reporting tax.
Disclaimer : I am not an accountant and the opinions expressed in the article may contain errors. Please consult with a CPA before deciding how to handle your cryptocurrency taxes.
Few key things to consider before calculating gain/loss
- If you buy one crypto currency with other it means you have sold the one to fiat currency and bought the other with fiat currency e.g if you buy 10 ETH with 1 BTC then it means you have sold 1 BTC for $$$$$ and bought 10 ETH for $$$$$
- When you deposit Crypto’s into an exchange it should look for a withdrawal from some where else and tally it
- Some times you get coins through mining those needs to be accounted too.
- If coins were received as a gift from friends/family those needs to be accounted too.
You pretty much have to keep the history of all transaction and compile all withdrawals/deposit across exchanges to really calculate the gain loss for the tax year.
Overall the gain loss calculation process is very cumbersome and there are few websites which can help you calculate gain loss e.g : bitcoin.tax, cointracker.io etc. There plans starts from $29.99 to calculate gain loss info, they also support multiple exchanges probably 10+ exchanges and have heard from my crypto buddies that support seems to be an issue when we have questions.
I came across this site https://bear.tax which is out recently but it only support major (Gemini,Coinbase,GDAX,Binance,Poloneix,Binance,Bittex) exchanges , but the sweet part is plans starts from $0.99. I was very pleased with the service and support I got from them.
BearTax - Your Crypto Tax Assistant_Simple & trusted platform for crypto traders, accounting professionals, CPAs to connect exchanges, import transactions…_bear.tax
If you would like to try them, You can use the coupon code “BEARCLAW” which offers 20% discount on the plan for the first 100 members.
I thought I would share this information to my readers. If you like the read give me a clap.