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Crypto Tax Calculator – Doing Your Crypto Taxes Has Never Been Easier

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Introduction

The Irish government has provided some information about their stance on crypto taxes but the main document of reference is just three pages and was created in 2018. While this is a great start it can be difficult to figure out how to interpret the information and see how it relates to specific transactions. 

With this in mind, we wanted to cover how CryptoTaxCalculator has chosen to interpret the tax laws, what this means for some of the most common transactions in the crypto space, and the easiest way to do your taxes.

Key interpretations

One important thing to note is that with the crypto space so new and constantly changing it can be difficult to figure out exactly what the laws mean and what the government really wants you to do. The following information is how CryptoTaxCalculator has chosen to interpret the tax laws and how we have built our tax calculator. Of course, the government could change these laws and we have chosen to be as conservative as possible, if you are unhappy with how the laws apply to your circumstances we recommend you seek the advice of an accountant.

  1. The taxes that apply are different for individuals and corporations we will focus on traders who don’t use a company to conduct their trades
  2. A capital gains tax event is traded whenever you trade an individual cryptocurrency, this is not limited to fiat to crypto transactions but also includes whenever you trade one crypto for another
  3. Moving cryptocurrency between wallets you own is not a tax event as you control the crypto throughout the process
  4. Defi platforms such as Compound or Aave use their own tokens, when you deposit funds to a platform like this it triggers a tax event as you are selling one crypto for the platform’s tokens
  5. If you are airdropped tokens earn interest this is classified as income not capital gains and as such will be subject to income tax
  6. The price used to calculate the transaction is based on etherscan or coingecko, with the understanding that this data very accurate

Individual transactions

The first transaction nearly everyone will make is exchanging fiat (such as euros) to one of the major cryptocurrencies such as bitcoin. This initial transaction isn’t subject to capital gains but forms the cost basis if you sell the bitcoin later.

Let’s say you then exchange bitcoin for ethereum directly, this will trigger a capital gains tax event with the amount being calculated as the euro value you exchanged the bitcoin for ethereum minus the price you bought the bitcoin for.

Here is an example for further clarity:

You purchase 100 units of Bitcoin for a total of $10,000. A week later you exchange 10 of Bitcoin for 20 of Ethereum.

At the time of the exchange, 20 of Ethereum is worth $2,000.

The capital gain in this transaction can be calculated with the cost base as $1,000 (Purchase price of 10 units of Bitcoin) and the capital proceeds as $2,000 (Market value of Ethereum at the time of exchange).

Capital Gain = $2,000 – $1,000

= $1,000

This process can be tedious to calculate for multiple transactions. In the example above, our CryptoTaxCalculator software would automatically calculate the capital gain of $1,000 for you.

As another example, for the more experienced crypto users: 

You transfer funds to the Curve Finance protocol and lend in out to earn interest, periodically the interest is deposited into the account. As the gain isn’t made from a trade of one crypto to another the airdrop is considered income. The tricky part is that if you hold the token airdropped and it appreciates in value you will have to pay capital gains tax when you eventually trade it for something else. In this case, the cost basis is based on when you the value when the tokens were airdropped to you.

What about wrapping bitcoin or ethereum?

This is a little tricky and comes down a lot to interpretation, technically trading a coin for the wrapped version of it is a crypto to the crypto transaction so CryptoTaxCalcualtor has taken a conservative approach and marks these as a capital gains event.

The easiest way to do your crypto taxes

Whether you have just bought bitcoin using a Bitcoin ATM or have been more involved in the Defi space the process of calculating taxes can be tedious. Luckily, CryptoTaxCalculator simplifies this for you, all you have to do is upload your transaction history, any wallets you have and make sure the transactions are classifies correctly. The rest is calculated for you, along with your current holdings and a breakdown of the performance of each coin you hold.  Even if you need to calculate your taxes for previous periods CryptoTaxCalculator can help with that too.

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