The guidance around taxable events has become murky, largely due to new activities related to decentralized finance. Here are some ways you can prepare for the upcoming crypto tax season.
The tax laws surrounding crypto earned viaremain the most complicated. Generally, the act of depositing your coins into a staking pool is not a taxable event, but the staking rewards you receive may be taxable. The IRS has not formally issued specific guidance on this staking rewards, so it is best to consult with a tax professional well-heeled in crypto taxes if you earn crypto through staking.
Losses incurred from trading can be used to offset your capital gains as well as deduct up to $3,000 off your normal income tax depending on how long you’ve held the assets for . Any additional losses can be carried forward to the next tax year. You do, however, have to show a loss across all assets in a particular class to qualify for a capital gains reduction.Calculating how much cryptocurrency tax you owe in the U.S.
For some, this might only involve logging one or two trades. But for more experienced investors who have dabbled in NFTs, yield farming, airdrops and other types of crypto trading, it can be a monumental task. That’s why it’s usually advisable to keep track of your trades as you go along throughout the tax year to prevent having to do it all in one go.
Once you’ve completed the first step, you’ll then need to calculate any capital gains and losses. There are a number of platforms that can take care of this for you, some of which offer free trials and may provide all you need to complete this next step.
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