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Tax Tips For Cryptocurrency

Tax Tips For Cryptocurrency

Read about the four tax tips to avoid the common mistakes that taxpayers make when it comes to crypto taxes.

Dexter Cooke
Oct 11, 2021

Table of Contents

Filing and reporting taxes is a cumbersome process. Crypto taxes being a relatively new topic for most buyers and investors, and the Internal Revenue Service (IRS) bringing in new tax rules and regulations, understanding tax on cryptocurrency has become all the more important.

Here are a few tax tips for cryptocurrency that will help you file and report taxes in a seamless manner.

Regulation For Crypto Taxes In The United States

According to the Notice 2014-21 of the Internal Revenue Service, cryptocurrency holdings and transactions are considered as property and not currency. Crypto taxes depend on how long you have been holding the crypto and your income tax bracket as well. This is where your taxes are classified as short-term capital gains taxes and long-term capital gains taxes.

Short-term capital gains taxes apply when the crypto is sold before completion of one year from buying them, whereas long-term capital gains taxes apply when the crypto is sold after a year of buying. The tax rates vary from 10% to 37% and 0% to 20% respectively.

3 Tax Tips For Cryptocurrency

Taxes in themselves are a complicated process, and crypto taxes being relatively new can easily baffle you.

Here are some of the tax tips to avoid the common mistakes that taxpayers make when it comes to crypto taxes:

1. Note Down Important Transaction Information

There are a few pieces of information that you need to know when filing crypto taxes. In order to ease the process of tax filing, you must keep a record of every transaction that you make:

●   Date and time of acquisition

●   Basis and fair market value at the time of acquiring

●   Date and time of selling

●   Fair market value at the time of selling

Doing so will make your tax calculation even easier.

2. Include Full Crypto Transactions

Well, most people are unaware of this but, you have to include the crypto transaction history of past years as well! Sounds weird right?

When submitting your crypto taxes, you must provide your full transaction history. But why must one do this? This is because of cost basis value in finance. Including your full crypto transaction history has a good side to it as well. If your records reveal that you incurred losses in prior years, reviewing them might help you save a lot of money on your taxes.

3. Crypto Losses

While cryptocurrency earnings are subject to taxation, cryptocurrency losses can be utilized to lower your tax burden- and most taxpayers are unaware of this fact.

As mentioned above, crypto is treated as property. Due to this, even if you incur losses in a particular year, you can use them to offset your capital gains and this can reduce the overall tax that you pay.

You can offset up to $3000 every year in your regular income. Another great thing about crypto is that wash sale rules do not apply to it.

4. Consistently Follow One Cost-Based Method

Two of the most followed calculation methods are first-in-first-out (FIFO) and last-in-first-out (LIFO). The FIFO method means that coins that are bought first are sold first. Conversely, the LIFO method implies that the coins bought last are sold first.

Needless to say, both processes bring out different outcomes in your capital gains. Thus it is advisable to be consistent about your cost-based method. Also, the IRS does not allow you to switch methods very easily. So if you want to shift to a different method, you must physically make a request for permission to change the cost-basis method.

The Bottom Line

Crypto taxes in itself can be a complicated process, and with the IRS bringing in new regulations every now and then, the already complex process can make anyone make small mistakes that can often cost taxpayers an arm and a leg.

With these four tax tips for cryptocurrency, you can ensure that your tax reporting will be smooth and hassle-free.


  • What is the short-term and long-term capital tax rate?

The tax rates on short-term capital gains and long-term capital gains range from 10% to 37% and 0% to 20% respectively.

  • Why should I include my full crypto transaction history while reporting taxes?

Including your full crypto transaction history can reveal if you incurred losses in prior years. Reviewing your previous losses might help you save a lot of money on your taxes.

  • Why are crypto losses important for tax calculation purposes?

You can use crypto losses to offset your capital gains and this can reduce the overall tax that you pay, even if you incur losses in a particular year. You can offset up to $3000 every year in your regular income.

Dexter Cooke | He is an orthopedic surgeon who insists that a physician's first priority should be patient care. He specializes in minimally invasive complete knee replacement surgery and laparoscopic procedures that reduce pain and recovery time. He graduated from the Medical University of South Carolina with a medical degree and a postdoctoral fellowship in orthopedic medicine.


Bitcoin in the Next Decade

Bitcoin came into the market as a revolution. In the current finance ecosystem, it behaves like a through the thing. Although it is volatile, the overall picture of Bitcoin has remained too rosy to cash. When we see the introduction of Bitcoin coming in a big way, we see some change taking place.

Can a local business accept bitcoin?

Nowadays, many startups and small businesses have come into existence. Everyone uses mobile phones, and everyone wants to pay digitally rather than in cash. There are multiple online payment options like Google Pay, Phone, Paytm, PayPal, Card swipe, QR code, UPI, and many more, and it makes the payment easy.

Earn good money with bitcoins – What are the top methods?

The primary motive of every person in life is to earn money. There are numerous ways to earn money, but bitcoin is the perfect option if you want to do it uniquely and easily. Bitcoin is not only a cryptocurrency that allows you to make payments, but it also provides you with several methods through which you can earn money, and some of them are listed below.

Do Bitcoin Benefits Overshadow Its Risks?

Bitcoin's journey has been quite interesting as it has ride waves of market volatility and interest of the public, but the main reason behind swings in its price is an actual reality. The crypto world is massive as thousands of cryptocurrencies exist in it and offer significant advantages to users.

Is bitcoin taxable or not?

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The Basic knowledge of blockchain

Bitcoin was launched in 2008 by Satoshi Nakamoto to make the digital world. Yes, there were a lot of problems before bitcoin. For example, people use fiat currency, and if they want to transfer money abroad or outside the country, they need to pay high charges to third parties like banks and financial institutions.

Different ways to make money with cryptos!

Everyone is talking about cryptocurrencies nowadays. For most people, it is just a method for trading. However, if you look at the bigger picture, it is not only trading that has made it so popular. You can go for other methods of making money with cryptocurrencies, provided you are aware of them. First of all, you need to get the small picture of cryptocurrency.

Finding the 'Right' time to invest in Bitcoin

Far from being a red flag best avoided, this is testament to the fact that with Bitcoin more than most other trades, timing is an imperative aspect of success, though perhaps not in the ways that you might assume. As such, while there isn’t exactly a ‘right’ time to trade, these tips can at least help you to find the time that works best for at least helping you to earn big from your efforts here.

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Crypto in El Salvador

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Top 5 ways to invest in Blockchain technology boom

Amidst the strong headlines of Covid -19 and its impact on global economies, something else was happening behind the scenes. It was the rush to invest in the growing blockchain technology. Business owners, investors, and key players across all industries are increasingly getting into the transformative blockchain technology.

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