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Ask HN: How do I pay taxes on crypto/token trading

48 points by beedrillzzzzz 9y ago

From what I have read and can assume, in the USA trades between tokens should be treated as tax events to apply short/long term capital gains and not like-kind exchanges - tax should be paid immediately (current tax cycle), rather than when exchanged back to fiat. Does anyone have any useful resources or authoritative info & suggestions on how to go about calculating and reporting taxes on crypto and ethereum tokens? Thank you in advance.

kruhft 9y ago
Capitol Gains when converted to cash, in Canada. Keep your records.
- coralreef 9y ago
  What about crypto to crypto conversion? Taxable event?
  - surds 9y ago
    From what I have read on the matter, yes. If you made gains on one crypto and converted that into another, you own tax on the gains of the first one. How does loss account in this situation? Suppose some crypto has fallen and I am in loss - does this 'loss' (at current valuation) help reduce the tax liability?
  - Bluecobra 9y ago
    Yes: https://www.bloomberg.com/amp/news/articles/2017-12-21/tax-free-bitcoin-to-ether-trading-in-u-s-to-end-under-gop-plan https://www.bloomberg.com/amp/news/articles/2017-12-21/tax-f...
  - kruhft 9y ago
    Yes, I've heard that as well.
- jackgolding 9y ago
  Anyone know if this is the same in Australia?
  - Mandatum 9y ago
    Unfortunately no. In AU, you pay capital gains on every single transaction you make - AUD to BTC, BTC to LTC, LTC to anything else. This makes trading regularly on places like Binance incredibly unattractive. There are discounts for holding over a year, and capital losses cannot be used to offset your tax. As an individual you are given a 50% discount however on your CGT, and 20% of your CGT can count towards your personal income tax. If you're trading more than $10K AUD and you get audited, you're in for a world of pain if you haven't engaged a crypto knowledgeable accountant. If you have substantial investments in crypto in AU - once you talk to an accountant who is knowledgeable of crypto (and you'll need to hunt one down, not many are) they'll tell you immediately to incorporate in NZ and transfer ownership to the company. NZ doesn't have capital gains tax for crypto and you can pay yourself dividends.
    - jackgolding 9y ago
      Wow I'm glad I asked!
deleted 9y ago
[deleted]
colecut 9y ago
Here are some links I have come across My favorite summary: https://qz.com/1156706/a-guide-to-paying-taxes-on-bitcoin-investments/ https://qz.com/1156706/a-guide-to-paying-taxes-on-bitcoin-in... This was linked from a message on GDAX: https://www.irs.gov/pub/irs-drop/n-14-21.pdf https://www.irs.gov/pub/irs-drop/n-14-21.pdf And some additional tax tips: https://cointelegraph.com/news/crypto-tax-tips-to-start-2018-right https://cointelegraph.com/news/crypto-tax-tips-to-start-2018...
philipodonnell 9y ago
The tax accounting isn't that complicated. I don't have anything specific to point you to, but for the most part, cryptocurrency assets will be treated like any other asset like a stock or bond. If you sell it for more than you bought it for then you owe taxes on the difference in the tax year you made the sale. The only reason it seemed complicated is people were trying to gimmick their way out of it by making complicated arguments for preferential tax treatment. This is always the way it was headed IMHO.
throwaway011114 9y ago
I don't think it has to be such a headache as long as you keep records. What I plan on doing is calculating my gains and losses using https://bitcoin.tax/ https://bitcoin.tax/ and bringing the report to a CPA to check over. Not sure about the "paid immediately" part. That's news to me actually. Can anybody else weigh in on this? Edit: https://www.irs.gov/faqs/estimated-tax https://www.irs.gov/faqs/estimated-tax suggests you do if you expect to owe more than $1,000 in taxes.
- beedrillzzzzz 9y ago
  To clarify: paid immediately as in the current tax cycle, and not when liquidated to fiat as another reply suggests is law in Canada.
goodoldboys 9y ago
I use bitcoin.tax and it's made things so much easier. You can import trading history from the major exchanges and for any non-major exchange trading you can import manually or with a CSV. It's free for up to 100 "events" (trades, mining, gifts, income, etc) and a reasonable $20 per year for anything above that. I'll be taking the output from that software to give to my accountant and go from there.
companyhen 9y ago
I'm using http://cointracking.info http://cointracking.info - great support so far when I run into issues. 10% off with my Affilate link - https://cointracking.info?ref=Z106753 https://cointracking.info?ref=Z106753 (^ if this is not allowed I can remove it)
aryzle 9y ago
From Bluecobra, thought it was really good and worth repost https://www.bloomberg.com/amp/news/articles/2017-12-21/tax-free-bitcoin-to-ether-trading-in-u-s-to-end-under-gop-plan https://www.bloomberg.com/amp/news/articles/2017-12-21/tax-f...
- beedrillzzzzz 9y ago
  Article gives me the impression it was never a "lucrative tax break" and just a point of confusion, and coin-to-coin exchanges have always been subject to capital gains. Anyone have thoughts on this?
bitthrow 9y ago
I don't think it's quite as straightforward as people are making it out to be here, especially when considering forks. If you bought BTC a year ago and sell BCH (or BTC) today, what was your purchase price? There are currently a couple of dozen Bitcoin forks, each with arguably equal claim to be the true successor. So it's difficult enough if you bought before all the forks and are selling all of your BTC in one go now, but lord help you and your accountant if you've bought or sold any inbetween some of the forks.
- beedrillzzzzz 9y ago
  It seems like forks, smart contracts and related complexities (most recently noticed ETH -> WETH on radarrelay.com), coins/tokens that function in different ways (minting), all seem like they can affect record keeping for taxes in interesting ways... at the very least making it difficult to point to transactions and call them simple trades.
- dahdum 9y ago
  At least for USA exchanges, only Bitcoin Cash has a marketplace so it's the only one I tracked. I put a cost basis of $0 at the time of fork, and paid short term capital gains on the sale.
  - crazypyro 9y ago
    Could you argue that the cost basis of your bitcoin was changed because BCH is similar to a stock dividend that is reinvested?
    - dahdum 9y ago
      Maybe, but I've read CPA advice on just declaring as income. Seems to be the most conservative approach and didn't change the tax substantially for me.
PhrosTT 9y ago
This is pretty awesome: https://www.reddit.com/r/personalfinance/comments/7p9a2t/cryptocurrency_a_guide_to_common_tax_situations/ https://www.reddit.com/r/personalfinance/comments/7p9a2t/cry...
- aryzle 9y ago
  thank you!!!
flignats 9y ago
https://bitcoin.tax/ https://bitcoin.tax/
kumarski 9y ago
http://zenledger.io http://zenledger.io My friends and I have been building out tech in this space. (no we're not doing an ICO= we've been asked if we are by so many people, jesus) The 1031 laws change things for people, feel free to ping me if you have deeper questions.
- beedrillzzzzz 9y ago
  I will be sure to check out ZenLedger! Do the previously vague 1031 laws mean one should file 2017 and 2018 taxes differently? Is it legally valid to treat tokens as like-kind assets in 2017?
  - kumarski 9y ago
    I deal more on the marketing/branding front. (it's being redone, don't panic lols) We have a hardcore CPA/IRS founder on team, I will ask them and get back to you.
- nodesocket 9y ago
  Zenledger is a nice startup idea. I thought that Coinbase is sending out 1099 (K's or MISC) to users and the IRS though already? I wonder how many US citizens will just ignore their tax obligations thinking crypto trades, profits are untraceable.
  - deleted 9y ago
    [deleted]
- rizwank 9y ago
  Do you support optional 1031-like kind for 2017? What about optional currency-to-currency for those looking to be aggressive? Thanks!
- anon_man 9y ago
  Will this work if I use Bittrex, Binance, and Gemini?
nlombardi 9y ago
I actually just wrote an article on this: https://medium.com/@nkmlombardi/the-complicated-landscape-of-cryptocurrency-taxation-fde0e1baca99 https://medium.com/@nkmlombardi/the-complicated-landscape-of...
throwaway481516 9y ago
Do you know what is the tax situation for non-residents using an US exchange to convert to fiat? Should non-citizens, non-residents also pay capital gain tax?

48 points by beedrillzzzzz 9y ago

kruhft 9y ago

Capitol Gains when converted to cash, in Canada. Keep your records.

coralreef 9y ago
What about crypto to crypto conversion? Taxable event?
- surds 9y ago
  From what I have read on the matter, yes. If you made gains on one crypto and converted that into another, you own tax on the gains of the first one. How does loss account in this situation? Suppose some crypto has fallen and I am in loss - does this 'loss' (at current valuation) help reduce the tax liability?
- Bluecobra 9y ago
  Yes: https://www.bloomberg.com/amp/news/articles/2017-12-21/tax-free-bitcoin-to-ether-trading-in-u-s-to-end-under-gop-plan https://www.bloomberg.com/amp/news/articles/2017-12-21/tax-f...
- kruhft 9y ago
  Yes, I've heard that as well.
jackgolding 9y ago
Anyone know if this is the same in Australia?
- Mandatum 9y ago
  Unfortunately no. In AU, you pay capital gains on every single transaction you make - AUD to BTC, BTC to LTC, LTC to anything else. This makes trading regularly on places like Binance incredibly unattractive. There are discounts for holding over a year, and capital losses cannot be used to offset your tax. As an individual you are given a 50% discount however on your CGT, and 20% of your CGT can count towards your personal income tax. If you're trading more than $10K AUD and you get audited, you're in for a world of pain if you haven't engaged a crypto knowledgeable accountant. If you have substantial investments in crypto in AU - once you talk to an accountant who is knowledgeable of crypto (and you'll need to hunt one down, not many are) they'll tell you immediately to incorporate in NZ and transfer ownership to the company. NZ doesn't have capital gains tax for crypto and you can pay yourself dividends.
  - jackgolding 9y ago
    Wow I'm glad I asked!

deleted 9y ago

[deleted]

colecut 9y ago

Here are some links I have come across My favorite summary: https://qz.com/1156706/a-guide-to-paying-taxes-on-bitcoin-investments/ https://qz.com/1156706/a-guide-to-paying-taxes-on-bitcoin-in... This was linked from a message on GDAX: https://www.irs.gov/pub/irs-drop/n-14-21.pdf https://www.irs.gov/pub/irs-drop/n-14-21.pdf And some additional tax tips: https://cointelegraph.com/news/crypto-tax-tips-to-start-2018-right https://cointelegraph.com/news/crypto-tax-tips-to-start-2018...

philipodonnell 9y ago

The tax accounting isn't that complicated. I don't have anything specific to point you to, but for the most part, cryptocurrency assets will be treated like any other asset like a stock or bond. If you sell it for more than you bought it for then you owe taxes on the difference in the tax year you made the sale. The only reason it seemed complicated is people were trying to gimmick their way out of it by making complicated arguments for preferential tax treatment. This is always the way it was headed IMHO.

throwaway011114 9y ago

I don't think it has to be such a headache as long as you keep records. What I plan on doing is calculating my gains and losses using https://bitcoin.tax/ https://bitcoin.tax/ and bringing the report to a CPA to check over. Not sure about the "paid immediately" part. That's news to me actually. Can anybody else weigh in on this? Edit: https://www.irs.gov/faqs/estimated-tax https://www.irs.gov/faqs/estimated-tax suggests you do if you expect to owe more than $1,000 in taxes.

beedrillzzzzz 9y ago
To clarify: paid immediately as in the current tax cycle, and not when liquidated to fiat as another reply suggests is law in Canada.

goodoldboys 9y ago

I use bitcoin.tax and it's made things so much easier. You can import trading history from the major exchanges and for any non-major exchange trading you can import manually or with a CSV. It's free for up to 100 "events" (trades, mining, gifts, income, etc) and a reasonable $20 per year for anything above that. I'll be taking the output from that software to give to my accountant and go from there.

companyhen 9y ago

I'm using http://cointracking.info http://cointracking.info - great support so far when I run into issues. 10% off with my Affilate link - https://cointracking.info?ref=Z106753 https://cointracking.info?ref=Z106753 (^ if this is not allowed I can remove it)

aryzle 9y ago

From Bluecobra, thought it was really good and worth repost https://www.bloomberg.com/amp/news/articles/2017-12-21/tax-free-bitcoin-to-ether-trading-in-u-s-to-end-under-gop-plan https://www.bloomberg.com/amp/news/articles/2017-12-21/tax-f...

beedrillzzzzz 9y ago
Article gives me the impression it was never a "lucrative tax break" and just a point of confusion, and coin-to-coin exchanges have always been subject to capital gains. Anyone have thoughts on this?

bitthrow 9y ago

I don't think it's quite as straightforward as people are making it out to be here, especially when considering forks. If you bought BTC a year ago and sell BCH (or BTC) today, what was your purchase price? There are currently a couple of dozen Bitcoin forks, each with arguably equal claim to be the true successor. So it's difficult enough if you bought before all the forks and are selling all of your BTC in one go now, but lord help you and your accountant if you've bought or sold any inbetween some of the forks.

beedrillzzzzz 9y ago
It seems like forks, smart contracts and related complexities (most recently noticed ETH -> WETH on radarrelay.com), coins/tokens that function in different ways (minting), all seem like they can affect record keeping for taxes in interesting ways... at the very least making it difficult to point to transactions and call them simple trades.
dahdum 9y ago
At least for USA exchanges, only Bitcoin Cash has a marketplace so it's the only one I tracked. I put a cost basis of $0 at the time of fork, and paid short term capital gains on the sale.
- crazypyro 9y ago
  Could you argue that the cost basis of your bitcoin was changed because BCH is similar to a stock dividend that is reinvested?
  - dahdum 9y ago
    Maybe, but I've read CPA advice on just declaring as income. Seems to be the most conservative approach and didn't change the tax substantially for me.

PhrosTT 9y ago

This is pretty awesome: https://www.reddit.com/r/personalfinance/comments/7p9a2t/cryptocurrency_a_guide_to_common_tax_situations/ https://www.reddit.com/r/personalfinance/comments/7p9a2t/cry...

aryzle 9y ago
thank you!!!

flignats 9y ago

https://bitcoin.tax/ https://bitcoin.tax/

kumarski 9y ago

http://zenledger.io http://zenledger.io My friends and I have been building out tech in this space. (no we're not doing an ICO= we've been asked if we are by so many people, jesus) The 1031 laws change things for people, feel free to ping me if you have deeper questions.

beedrillzzzzz 9y ago
I will be sure to check out ZenLedger! Do the previously vague 1031 laws mean one should file 2017 and 2018 taxes differently? Is it legally valid to treat tokens as like-kind assets in 2017?
- kumarski 9y ago
  I deal more on the marketing/branding front. (it's being redone, don't panic lols) We have a hardcore CPA/IRS founder on team, I will ask them and get back to you.
nodesocket 9y ago
Zenledger is a nice startup idea. I thought that Coinbase is sending out 1099 (K's or MISC) to users and the IRS though already? I wonder how many US citizens will just ignore their tax obligations thinking crypto trades, profits are untraceable.
- deleted 9y ago
  [deleted]
rizwank 9y ago
Do you support optional 1031-like kind for 2017? What about optional currency-to-currency for those looking to be aggressive? Thanks!
anon_man 9y ago
Will this work if I use Bittrex, Binance, and Gemini?

nlombardi 9y ago

I actually just wrote an article on this: https://medium.com/@nkmlombardi/the-complicated-landscape-of-cryptocurrency-taxation-fde0e1baca99 https://medium.com/@nkmlombardi/the-complicated-landscape-of...

throwaway481516 9y ago

Do you know what is the tax situation for non-residents using an US exchange to convert to fiat? Should non-citizens, non-residents also pay capital gain tax?