How Koinly Crypto Tax Calculator Can Help
We get it. Crypto taxes are time consuming, thats why we made Koinly crypto tax calculator. We make it easy to get your crypto taxes done in no time at all and ensure you remain tax compliant.
All you need to do with Koinly is sync all the crypto exchanges, wallets and blockchains you use using API or by importing a CSV file of your transaction history. Once youve done that, Koinly will calculate your capital gains, losses, income, expenses and more and fetch your crypto tax report, ready for you to download.
For US investors, Koinly can generate a pre-filled Form 8949 and Schedule D, the Complete Tax Report and a variety of tax reports for tax apps like TurboTax and TaxAct.
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Gifting Or Donating Cryptocurrency
The tax implications of gifting or donating cryptocurrency are the same as the tax rules for gifting or donating stock.
Gifts of cryptocurrency are not taxable up to an annual dollar limit, which is $15,000 for tax year 2021 and $16,000 for tax year 2022. You could gift your child, for example, up to $15,000 of cryptocurrency without either of you owing any taxes. If your child later sells the crypto, then they will be subject to the same rules for capital gains taxes, with the tax basis for the sale equal to the amount that you originally paid for the crypto. For taxable gifts over the annual exclusion, tax rates range from 18% to 40%, depending on the size of the gift.
If you donate cryptocurrency, such as to a charity, the donation is not taxable. You dont recognize any capital gains or losses on donated cryptocurrency.
How To Handle Cryptocurrency Transactions On Your Tax Return
You can usually download a transaction report from your cryptocurrency exchange platform, including all of your buys, sells, and exchanges of cryptocurrency in your account. If all of your cryptocurrency transactions occur on one exchange, gathering the information you need to report transactions on your tax return should be relatively easy. If you have cryptocurrency transactions on several exchanges, you’ll need to download several reports.
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How To Calculate Your Cryptocurrency Taxes Canada
Calculating your crypto taxes so you can accurately report them to the CRA can take hours – if not days if you trade at volume! You can do it all manually, or you can use a crypto tax app like Koinly to save you hours.
To calculate your crypto taxes manually, follow these steps:
If you have a higher net capital loss than your net capital gain, remember you can carry capital losses forward to future tax years to offset against future gains.
Just Using Crypto Exposes You To Potential Tax Liability
You might think that if you only use but not trade cryptocurrency youre not liable for taxes.
Any time you exchange virtual currency for real currency, goods or services, you may create a tax liability. Youll create a liability if the price you realize for your cryptocurrency the value of the good or real currency you receive is greater than your cost basis in the cryptocurrency. So if you get more value than you put into the cryptocurrency, youve got yourself a tax liability.
Of course, you could just as well have a tax loss, if the value of goods, services or real currency is below your cost basis in the cryptocurrency.
In either case, youll have to know your cost basis to make the calculation.
Its important to note that this is not a transaction tax. Its a capital gains tax a tax on the realized change in value of the cryptocurrency. And like stock that you buy and hold, if you dont exchange the cryptocurrency for something else, you havent realized a gain or loss.
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Crypto Capital Gains Tax Rate Canada
Canada doesnt have a specific Capital Gains Tax rate and there is no short-term Capital Gains Tax rate and long-term Capital Gains Tax rate. Instead, your crypto capital gains are taxed at the same rate as yourFederal Income Tax rate and Provincial Income Tax rate. But remember – you’ll only pay tax on half your capital gain. You can see the Federal Income Tax rates for 2021 to 2022 below:
|On your first $49,020 of taxable income|
Meanwhile – the Provincial Income Tax rates are as follows:
Crypto Tax Guide 202: How To Report Crypto On Your Taxes
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Since Bitcoin was first introduced in 2009, interest in cryptocurrencies as an investment has slowly but surely gained steam. With this rise in popularity, it has led to increased scrutiny by tax authorities like the Internal Revenue Service . Because of this, its important that investors know the basics regarding filing and paying taxes on their cryptocurrency investments and income.
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How Does The Irs Classify Crypto
Cryptocurrency fits within what the IRS calls virtual currency. Virtual currency is treated as property for tax purposes. The IRS defines cryptocurrency as the following:
Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and a store of value other than a representation of the United States dollar or a foreign currency.
This definition includes most cryptocurrency but notably doesnt include non-fungible tokens . NFTs generally dont function as money or a store of value like other cryptocurrency. Although NFTs arent virtual currency, theyre likely to be treated as property for tax purposes even though the IRS hasnt explicitly said so.
For more information on how NFTs are taxed, please see our NFT Guide.
John Oakey Cpa Ca Tep Cc
National Director of Tax Services, Baker Tilly Canada
Specialties: Personal and Corporate Tax Advisory, Cryptocurrencies, Estate Planning, CRA dispute resolutions, and Tax Risk Management
- National Director of Tax Services, Baker Tilly Canada
- Vice-Chair of the CPA Canada Small and Medium Practitioner Tax Committee
- Member of the Program steering committee for the Atlantic Provinces Tax Conference
- Member of Canadian Tax Foundation Board of Governors
- Member of the Society of Trust and Estate Practitioners
- Member of the CPA Nova Scotia and CPA Canada
- Co-Author of the 2018 paper âDecrypting Cryptocurrencyâ for the Canadian Tax Foundation
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Crypto Gifts And Donations
Tax on cryptocurrency sent or received as a gift
The annual gift exclusion is $15,000 for the 2021 tax year in the US. This means that if you have either received or sent gifts below this threshold, the cryptocurrency is generally not taxed for either the receiver or sender.
The annual gift exclusion is calculated per person so that you can give multiple gifts to different persons without being taxed as long as the total amount sent to any single person does not exceed the allowance of $15,000.
If you exceed the annual gift exclusion for any single person, you will pay tax between 18% and 40% depending on the total amount gifted during the tax year.
The general rule for receiving crypto as a gift is that the receiver simply acquires the senders cost basis including the holding period. Neither the sender nor receiver is therefore taxed on the date of the transaction, but the receiver is instead first taxed when the coins are sold later in the future.
How To Determine If You Owe Crypto Taxes
You owe crypto taxes if you use your crypto in any way and it has increased in value from when you first bought it.
Here are the different types of taxable events for cryptocurrency transactions:
- Selling cryptocurrency for a fiat currency
- Using cryptocurrency to purchase goods or services
- Trading different types of cryptocurrency
These are only taxable events if the value of your crypto has gone up. To determine if you owe crypto taxes, you need the cost basis, which is the total amount you paid to acquire your crypto. Then you compare that to the sales price or proceeds when you used the crypto.
Let’s say you previously bought one bitcoin for $20,000. Here are examples of taxable events:
- If you sell one bitcoin for $50,000, you’d report $30,000 in gains.
- If you use one bitcoin to purchase a $45,000 car, you’d report $25,000 in gains.
- If you trade one bitcoin for $50,000 of another cryptocurrency, you’d report $30,000 in gains.
Trades between coins are where crypto taxes get complicated. A crypto trade is a taxable event. If you trade one cryptocurrency for another, you’re required to report any gains in U.S. dollars on your tax return.
Every time you trade cryptocurrencies, you need to keep track of how much you gained or lost in U.S. dollars. That way you can accurately report your crypto gains or losses. If you’d rather keep it simple, cryptocurrency stocks could make it easier to track gains and losses compared to buying and selling specific coins.
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New Tax Question On Schedule 1
For the first time, in 2020, the IRS has also added a new cryptocurrency question as the first line on the Schedule 1 tax form which will ask every American taxpayer: At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?
New IRS with cryptocurrency question
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Using Cryptocurrency To Pay For Goods And Services
A complicating factor for crypto investors arises when they attempt to use their virtual currency to pay for goods and services. The IRS chose to treat cryptocurrency as property in 2014 because most people only saw it as a capital asset at the time. Now, as more companies choose to accept cryptocurrency as a form of payment and people begin to adopt it as a unit of account, many people have begun to see it as a viable alternative currency. However, the current tax treatment of crypto impedes the wholesale replacement of fiat currency.
With traditional fiat currencies, you simply pay for your purchase and have no tax consequences related to cost basis or the value of your currency at the time of payment. However, cryptocurrency users must deal with capital gains and losses in addition to whatever sales taxes they might face at the point of sale.
For example, let’s imagine you bought $10 worth of Bitcoin two years ago and it has since appreciated to $100 in value. If you sold it on an exchange, you’d have $90 of realized long-term capital gains, just like you would with any other capital asset.
If you instead used that same $100 worth of Bitcoin to buy groceries from the supermarket, you’d still have to pay long-term capital gains taxes on the $90 difference between appreciated value and your cost basis.
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If You Mine Cryptocurrency
Cryptocurrency mining refers to solving cartographic equations to validate and add cryptocurrency transactions to a blockchain. In exchange for this work, miners receive cryptocurrency.
If you earn cryptocurrency by mining it, it’s considered taxable income and will typically be reported on For 1099-NEC at the fair market value of the cryptocurrency on the day you received it just as if it were self-employment income.
Reporting Crypto Ordinary Income
Unfortunately, ordinary income doesnât fall nicely onto one tax form like we saw with capital gains and Form 8949.
The ordinary income you receive from mining, staking, interest accounts, or perhaps crypto you received as payment from a job get reported on different tax forms, depending on the specific situation.
Schedule C – If you earned crypto as a business entity, like receiving payments for a job or running a cryptocurrency mining operation, this is often treated as self-employment income and is reported on Schedule C.
Schedule B – If you earned staking income or interest rewards from lending out your crypto, this income is generally reported on Schedule B.
Schedule 1 – If you earned crypto from airdrops, forks, or other crypto wages and hobby income, this is generally reported on Schedule 1 as other income.
To make things easier for investors, CoinLedger generates a complete income report that is included with your completed crypto tax reports. This report details the US Dollar value of all of your cryptocurrency income events that you received throughout the year: mining, staking, airdrops, and more. This income report can be used to complete your relevant ordinary income tax forms like Schedule 1, Schedule B, and Schedule C.
If you have any questions about how your crypto-related income needs to be reported, feel free to reach our live-chat customer support team via the chat widget on our homepage. We’re happy to answer any of your questions!
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How Does The Gst/hst Apply To Cryptocurrency
Where a taxable property or service is exchanged for cryptocurrency, the GST/HST that applies to the property or service is calculated based on the fair market value of the cryptocurrency at the time of the exchange.
If your business accepts cryptocurrency as payment for taxable property or services, the value of the cryptocurrency for GST/HST purposes is calculated based on its fair market value at the time of the transaction.
Keep all records that show how you calculated the fair market value.
Example : Business Income Or Loss
Alice regularly buys and sells various types of cryptocurrencies. She pays close attention to the fluctuations in the value of cryptocurrencies and intends to profit from the fluctuations. Her activities are consistent with someone who is engaged in the business of day trading. In 2017, Alice sold $240,000 worth of various cryptocurrencies, which she originally purchased for $200,000. Her net profit is $40,000. Since Alice is actively trading in cryptocurrency, which is a commercial activity, she has to report business income of $40,000 on her 2017 income tax return.
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What Is Cryptocurrency Mining
Mining is a process that uses computers or specialized hardware to confirm cryptocurrency transactions. A miner will group valid transactions into blocks and if these blocks are accepted by the corresponding cryptocurrencys network, they become part of a public ledger on the blockchain.
At this point, the miner usually receives two types of payments in cryptocurrency. The first is income for the creation of a new cryptocurrency, and the second is a payment for the successful validation by the miner. Those who perform the mining processes are paid in the cryptocurrency that they are validating.
Mining may have tax implications. The income tax treatment for cryptocurrency miners is different depending on whether your mining activities are a personal activity or a business activity. This is decided on a case-by-case basis.
How Is Crypto Taxed In Other Countries Than The Us
Generally speaking, most of the tax rules explained in this guide apply also to other countries. This means that you most likely have to pay both income tax on cryptocurrency received as income, and capital gains tax on your disposals from selling and trading.
The actual tax rate varies a lot between different countries and is often also dependent on your ordinary income and other capital gains. Some countries have special rules for calculating capital gains, such as the Superficial Loss Rule and . See also our country-specific crypto tax guides for more information:
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Do You Have To Pay Taxes On Cryptocurrency Profits
Crypto exchanges may not send you a tax form. You still need to report your crypto transactions, though. Some exchanges will create reports that you can use when you fill out your taxes. There are also third-party tools that can help you figure out what to put on your taxes.
If you dont tell the IRS about your cryptocurrency transactions, they may give you a fine. It is also possible that they will put you in prison for up to five years.
Bitcoin might be safe, but it is not always private. The IRS is working with other organizations to find out who has Bitcoin and does not report their gains.
If Your Bitcoin Is Stolen Tough
Being robbed is bad enough, and previously if youd been swindled of your bitcoins, you might have been able to deduct it as a theft loss on your taxes. However, the new tax rules do away with the deduction for personal theft losses.
Another tax rule doesnt look favorable for owners of digital currency, either. The IRS allows owners to trade many kinds of property for a similar kind of property without immediately incurring a tax liability its called a like-kind exchange.
Before the tax law changes, bitcoin owners wanted to know whether they could engage in like-kind transactions with other cryptocurrencies. The answer was unclear, Harris says. What was unclear was whether one crypto was like-kind to another. Now the new tax reform has limited like-kind exchanges to real property, not personal goods.
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