Don't Fear the Crypto Tax Calculations

in crypto •  21 days ago

This is for those in the US who have to comply with American tax law. I understand the UK just embraced the same law, but don't know whether it applies to 2018 or not.

If you're in the US, you need to file a form 8949. That's basically a profit and loss statement with every single trade on it, including the US dollar value at the time of each leg of the trade even if you were just going from crypto to crypto.

E.g. every time you sell BTC/ETH to buy an altcoin, the US govt. considers that a taxable event.

Pain in the ass, right?

The Good News


Though many of us hated that the market kept falling all year for 2018 AND also think this tax law to be ridiculous, the good news is that if you bought ANY altcoins after January, you probably have losses that can offset your income for the year, reducing your taxes.

The amount you can deduct in any one year tops out at $3,000. If you lost more than that (according to this law, not the way you may think of losses yourself) you can carry that forward into future years at the rate of $3,000 per year.

So if you have crypto gains in 2019, if you had enough trades into a falling market (relative to USD) in 2018, it will be as if you gained up to $3,000 less in 2019. And that's not just against crypto gains. It can also offset your gains in selling gold, silver, etc.

(I think sometimes gold/silver may count as collectibles sales, which I don't know whether form 8949 losses can offset those gains. But I think in the end you get the deductions on your overall tax liability, including even regular income. Ask a tax professional for details on your situation.)

What to Use


I decided to use Bear.Tax because it was cheapest and also had an API integration with Binance. I also took a look at TokenTax.co which I might have used to have them completely file for me, not just give me the profit/loss form, if I wasn't needing to use my tax accountant to do some more complicated tax accounting for other stuff I had going on in 2018.

It took me a total of 20 minutes to do everything, which included the time it took me to wait to get a coupon code for 10% off in exchange for reviewing BearTax on their Facebook page and tweeting about them. I actually wound up getting 20% off, so that may be because the 10% end of year discount hasn't been turned off yet. I don't expect that will continue indefinitely.

There are others out there too, but these are the only ones I've investigated enough to say anything about them.

In Summary


I'm not a tax professional, so can't advise you to do X, Y or Z, but I can tell you that you are affected by these taxes and need to submit this form if you're an American who sold any crypto (even to buy other crypto) in 2018. If you need more hand-holding than one of these crypto tax sites offers you, then definitely do talk to a tax accountant.

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In the USA UU As in most European countries, the amount of taxes that citizens must pay is very high, I have a family member who recently moved to use, and what they tell me is that a large part of their income goes to to pay taxes. In spite of that, life has changed radically, there, you pay your taxes and get excellent services in return, the laws work, etc. Here, no matter how much you pay, you will not receive compensation for any of that.

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You're in Venezuela? If I recall correctly your location, yes I can see that right now taxes are returning no benefits. It's all relative though. We in the US would not say we're getting our money's worth for our Federal taxes. Most of our taxes go to pay for military weapons (which we definitely don't want to ever use) and interest payments on all the money that was borrowed to spend on the military in the past. The next highest portion goes to retirement payments for people who are old now. People have mixed feelings about that because they don't know that it will still be there when they are old themselves.

In the end, no one seems to want to pay taxes. Maybe in Iceland people feel it is a fair trade. Switzerland? I'm sure a few countries think so. But the vast majority of people just want to reduce their taxes other than the local taxes that pay for roads, schools, and other things people actually use.

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Greetings, if I live in Venezuela, it's in South America. I agree with you that the citizens of any country want the taxes they pay to be used on things they really use, such as roads, schools, etc., not on weapons or investments that nobody knows if God will give them life, to enjoy them. . .

With luck, someday, in all countries, there are fair laws that allow people to make a fair payment of their taxes and be consistent with what they receive.

“Have to comply” lol

Posted using Partiko iOS

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You're a braver soul than I if you choose not to! (They got Al Capone.)

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I don't earn enough money from all sources to have to file at all. So ...yay?

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I guess it depends on how you look at it. To me the main thing about 2018 is that it is a year the vast majority of people are going to get losses they can claim to reduce taxes EVEN IN FUTURE YEARS! So the question is, do you have losses according to the govt's screwy new tax rules? If you do, it may be worth filing with something like TurboTax (which beartax integrates with) just to lock in those losses. That way even if you have crypto gains in future years (which hopefully you will, or what are we doing here?) you'll still get those savings from this year.

You know, there are people still carrying forward losses from the Dotcom crash of 2000!

Thanks for the recommendation! I have used bitcoin tax in the past. I remember I spend 90 USD on that. How much does bear tax cost?

Posted using Partiko Android

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It depends on how many transactions you have. It charges by the number of transactions. If you had more than 1,000 tx in 2018, then you'll pay more with beartax. Otherwise, you'll pay less.

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Thank you so much for the advice! This is really helpful!

Posted using Partiko Android

Interesting! I have been doing it myself with spreadsheets to then give to my tax preparer but it has continued to get burdensome so I will have to check it out! Do you have an affiliate link? Might as well get some benefit if I use it!

Posted using Partiko iOS

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I had attempted the spreadsheet approach for a few months, then gave up. That made me not want to deal with the entire tax issue. But then I found these sites and it was so quick I regretted all the time I wasted dreading it. LOL

I don't have a tokentax afflink but my beartax one is https://app.bear.tax/#/register?refcode=TepMojkuzi (Thanks for the support :) )

I just hope that cryptocurrency would be accepted generally by the Nigeria government because currently the government is against it because if it is accepted, most people will not pay attention to the government and their selfish policies.

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But that means you aren't taxed on it, right? Is it actually outlawed there, or just ignored in the law?

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We are tasked only when one uses his or her debit or credit card to make deposit or transfer. But cryptocurrency is not generally recognized by the central bank of Nigeria as a form of money.

I know this is a few days late, but was hoping you had some thoughts on how Steemit earnings might be taxed if I never use the Steem I earn to buy, sell, or trade.

Also, what about the crypto I earn passively through Steem Power bid bot delegations. My account value has decreased by more than $3,000 so I'm not too worried about it, I just wanted to hear your thoughts.

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You know, that's one I've not figured out nor heard anyone in crypto tax talk about. I honestly hope no one pays any attention to this entire space. It would be terrible if we were forced to sell steem just to pay taxes on steem we've earned as if it was income, when we can't pay the tax with steem itself. That's the problem with taxing crypto before it becomes USD. They only accept the tax payments in USD, but we don't have any yet.

Thanks, very valuable information.

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