What you need to know to file your crypto taxes with confidence
The US tax season is once again upon us and with all eyes on bitcoin, it’s more important than ever to file your taxes correctly. If you bought, sold, traded or used crypto in 2020, you may owe taxes on your gains.
This guide highlights what you should know before diving into your crypto taxes with links to other helpful resources and forms. It is provided for information purposes only and is not intended as tax advice and we recommend that you consult with an independent tax advisor when making your tax filings.
Download your transaction history
First thing’s first: transaction history. Blockchain.com makes it easy to download your transaction history directly from your Blockchain.com Wallet and Exchange account. You’ll need to reference this when filing.
Simply login, toggle to your desired crypto (Bitcoin, Ethereum, Stellar, etc) and click “Download”. It’s as easy as that.
How are cryptocurrencies taxed?
Great question. Cryptocurrency taxes are a combination of capital gains tax and income tax. If you used crypto in 2020, you will likely pay one or both of these taxes, depending on what you did.
If you’ve filed with the IRS in the past, income tax is probably familiar to you. But what’s capital gains tax? Capital gains is the calculated profit or loss once you trade or sell your crypto.
Price you sold — Price you bought — fees = Capital Gain
Here are a few scenarios to help guide you through your filing.
Prepare your crypto taxes
There are a few forms you may need to file, again depending on your crypto activity.
- Form 8949 — Anyone who has gains or losses during the tax year will file this form. This is the most common form.
- Schedule D — Anyone who has gains or losses during the tax year will also file this form. This is a summary of your Form 8949 and details the total short and long term capital gains.
- Schedule 1 (Form 1040) — Anyone who received any form of income from cryptocurrencies during 2020.
Filing your crypto taxes is complex. You may be tempted to handle it yourself, but when in doubt, consult a professional. While there are many to choose from, Blockchain.com has partnered with Koinly and Lukka Tax to make your 2020 crypto filing a little easier.
Outside of the US? Koinly also offers specialized reports for other countries. Visit their website for more crypto tax information.
Have more questions? Read the official IRS guidance from 2019, crypto FAQ, and Publication 544.
The US filing deadline is April 15th. Don’t wait too long and happy filing!
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Source: https://medium.com/blockchain/2020-us-crypto-taxes-28690cb57c2d?source=rss—-8ac49aa8fe03—4
