Comment
Author: Admin | 2025-04-28
Is dependent on the regulations set forth by your country's tax authority. One of the most commonly used methods is FIFO (First-In-First-Out). FIFO means that your gains will be calculated by using your oldest coins' cost basis (“first-in”) to calculate your most recent trade or transaction (“first-out”). Here is a brief scenario to illustrate this concept: January 1st, 2018: You buy 1 BTC for $6,000 USD January 5th, 2018: You buy 1 BTC for $8,000 USD January 10th, 2018: You sell 1 BTC for $10,000 USD Using FIFO, capital gains would be realized on the 1 BTC you sold on January 10th, 2018 using the 1 BTC you bought on January 1st, 2018. Since you paid $6,000 USD on January 1st for 1 BTC and then sold 1 BTC for $10,000 USD on January 10th, your capital gain would be $4,000 USD, which you would pay taxes on. Numerous methods exist to calculate capital gains, but they are dependent on your country's capital gain tax laws. Canada, for example, uses Adjusted Cost Basis. In the United States, FIFO is the most commonly used method of capital gains calculations. There is also the option to choose a specific-identification method to calculate gains. These methods include LIFO, HCFO, HPFO, LCFO, LPFO, and CCFO. Calculating your gains by using an Average Cost is also possible. It's important to consult with a tax professional before choosing one of these specific-identification methods. Taxation of Crypto to Crypto Trades Prior to 2018, the tax laws in the United States were unclear whether crypto-currency capital gains qualified for like-kind treatment. In simplified terms, like-kind treatment did not trigger a tax event when exchanging crypto for other crypto; a tax event would only be triggered when selling crypto for fiat. If you are still working on your crypto taxes for 2017 and earlier, it is important that you consult with a tax professional before choosing to calculate your gains using like-kind treatment. At the end of 2017, a tax-bill was enacted that clearly limits like-kind exchanges to real estate transaction. This means that like-kind is no longer a potential way to calculate your crypto capital gains in the United States 2018 and beyond. Tax Rates: Short-Term & Long-Term Gains The rates at which you pay capital gain taxes depend your country's tax laws. In many countries, including the United States, capital gains are considered either short-term or long-term
Add Comment