Taxes can be tough — and that applies doubly for crypto taxes, a new set of regulations that most people remain unfamiliar with. Luckily, eToro has partnered with CoinTracker to give you a few tips, tricks, and tools that could help simplify the process just a bit.
What you should know
Though crypto’s been around since the aughts, the practice of taxing crypto has only been around for a couple of years. This means that many people — including tax accountants — aren’t as familiar with the ins and outs of the process as they are with other areas of tax code.
So if you’re a little confused on what needs to be reported and how to fill out the crypto portion of your tax return, CoinTracker has five tips that can help you gain a little clarity.
- If you had losses from selling crypto, you should report those losses. It’s true, you should only get taxed on gains and income when it comes to crypto; however, any capital losses over $3,000 can be carried forward and offset other gains in future tax years. By not marking these losses, you could be paying too much in the following years.
- Exchanging one crypto for another (including NFTs) is taxable. So are crypto rewards. Just because it’s not cryptocurrency, doesn’t mean that it’s not taxable. Same with rewards — just because you didn’t buy it yourself, doesn’t mean that it doesn’t count as income (or gains, depending on the situation). Don’t get penalized because you missed these pieces of the puzzle.
- Depending on if you held your crypto for more or less than one year, you could be taxed differently. Gains made in less than a year are taxed at your ordinary rate. But long-term gains (made if you held a crypto for more than a year) receive a preferential tax rate.
- If you only bought crypto, you can answer “no” on digital assets. This year’s IRS 1040 has a question about digital assets you will need to answer. If you sold, received as a reward or payment, or otherwise disposed of the digital asset, you’ll need to mark it “yes.” But if you only purchased the asset, held it without selling, or transferred it to your own wallet, you can mark this question “no.”
- The Ethereum merge was NOT a taxable event. But forks could be. As one of the largest events in crypto this year, there may be some questions around the Merge. But good news — it wasn’t a taxable event, even for those holding Ethereum. However, receiving tokens that came from a hard fork in the Ethereum blockchain is considered a taxable event.
How can CoinTracker help?
CoinTracker is a crypto tax and portfolio management software that helps users track their crypto transactions and calculate their tax liabilities. The platform offers features such as automatic import of transactions from exchanges and wallets, automatic calculation of capital gains and losses, and the ability to generate tax reports.
We’ve partnered with CoinTracker to offer eToro users free tax reports for up to 1,000 crypto transactions during your first year using CoinTracker, plus 10% off advanced tax plans. Head over to the tax center to take advantage of this offer today.
If you’re a member of the eToro Club, CoinTracker is able to offer additional services to help you with your crypto tax needs. Make sure to contact customer service or your Account Manager (888-271-0789) to get your special offer link.
Don’t panic!
Even if you filed taxes for your crypto last year, it’s likely that this year will not look the same. That’s why it’s so important to stay up-to-date on any changes and use tools like CoinTracker to make sure the process is as smooth as possible.
For additional questions around crypto and taxes at eToro, make sure to visit our Tax Help Center.
eToro USA LLC and its partnering entities are not involved with the use of CoinTracker products and are not liable for any issues relating to use of the product. Questions or concerns about the use of CoinTracker or this promotion should be directed to CoinTracker. Offer valid for new CoinTracker users only.
Trading may have tax consequences. eToro does not offer tax advice. Please consult with a tax professional.