How to Track Crypto Transactions for Taxes?

Cryptocurrencies
have
emerged
as
formidable
tools
in
the
landscape
of
modern
financial
systems.
You
can
find
more
than
10,000
different

types
of
cryptocurrencies
today.
Therefore,
it
is
important
to
understand
whether
they
can
be
included
in
the
modern
tax
systems.
You
might
have
doubts
regarding
the
best
practices
to
track
crypto
transactions
for
taxes
and
reporting
your

crypto
income.
However,
the
perspectives
on
cryptocurrencies
differ
across
governments,
financial
institutions,
and
users.

For
example,
the
Central
African
Republic
and
El
Salvador
have
already
adopted
Bitcoin
as
legal
tender.
On
the
contrary,
critics
point
out
that
cryptocurrencies
are
useful
only
for
scams,
gambling,
and
crimes
while
emphasizing
their
volatility.
Irrespective
of
the
success
or
failure
of
cryptocurrencies,
it
is
important
to
find
a
coherent
approach
to
crypto
taxation.
Let
us
learn
more
about
taxation
for
cryptocurrencies
in
the
US
and
how
you
can
track
and
report
crypto
transactions.

Embrace
the
technological
leap
and
global
adoption
that
awaits
in
the
upcoming
bull
run
of
2024-2025
with Crypto
Bull
Run
Ready
Career
Path

Are
Cryptocurrencies
Currency
or
Digital
Assets?

At
first
glance,
anyone
would
assume
that
cryptocurrencies
are
just
digital
assets.
On
the
other
hand,
it
is
also
important
to
note
that
tracking
cryptocurrency
transactions
would
also
involve
classifying
them
as
currency.
Upon
selling
cryptocurrencies
for
profit,
the
capital
gains
would
be
subject
to
taxation
like
other
assets.
On
top
of
it,
buying
products
or
services
with
cryptocurrencies
would
also
invite
taxes
according
to
the
value-added
or
sales
taxes
applicable
for
cash
transactions.

Before
you
look
for
a

Bitcoin
transaction
tracker,
you
must
also
learn
about
the
most
formidable
difficulty
in
taxing
crypto
assets.
Cryptocurrencies
are
anonymous,
and
it
is
difficult
to
link
crypto
transactions
with
specific
firms
or
individuals.
Reporting
rules
on

centralized
exchanges
can
lead
users
towards

decentralized
exchanges
or

peer-to-peer
transactions
without
the
involvement
of
any
centralized
authority.

With
such
challenges,
it
is
difficult
to
integrate
crypto
comprehensively
into
the
larger
tax
system.
Therefore,
policymakers
must
come
up
with
effective,
clear,
and
coherent
frameworks
to
avoid
confusion
regarding
taxation
of
cryptocurrencies.    

Enroll
now
in
the Bitcoin
Technology
Course to
learn
about
Bitcoin
mining
and
the
information
contained
in
transactions
and
blocks.

What
are
the
approaches
to
taxing
cryptocurrency
in
the
US?

Cryptocurrencies
are
gradually
gaining
more
popularity
for
mainstream
adoption.
Therefore,
the
United
States
Internal
Revenue
Service,
or
IRS,
has
been
focusing
more
on
taxation
of
cryptocurrencies.
Interestingly,
cryptocurrency
is
considered
currency
rather
than
property
or
merely
a
digital
asset
for
implementing
crypto
tax. 

You
would
need
a
crypto
wallet
transactions
tracker
to
ensure
accurate
tracking
and
reporting
of
crypto
transactions
to
avoid
penalties.
If
you
choose
investments
in
crypto
assets,
such
as

non-fungible
tokens,
and
use
them
for
other
profitable
transactions,
then
you
must
prepare
for
crypto
taxes.

It
is
important
to
remember
that
purchasing
cryptocurrencies
or
the
rise
or
fall
in
their
value
does
not
invite
taxes.
You
would
have
to
pay
taxes
when
you
invest,
sell,
or
give
away
the
cryptocurrencies
for
profits.
The
two
common
taxes
for
cryptocurrencies
include
capital
gains
tax
and
the
income
tax.

• 
  Capital
  Gains
  Tax

Capital
gains
tax
is
applicable
to
profits
achieved
through
the
sale
of
assets
purchased
at
lower
prices.
As
you
search
for
answers
to
“How
to
track
crypto
transactions?”
you
must
know
that
capital
gains
tax
comes
into
play
when
you
raise
profits
from
selling
or
trading
digital
assets.
If
you
had
the
cryptocurrencies
or
assets
for
less
than
a
year,
then
their
sales
or
trades
would
be
considered
short-term
gains.
On
the
other
hand,
holding
the
assets
for
more
than
a
year
entitles
them
to
long-term
gain.

Some
of
the
important
situations
in
which
you
have
to
pay
capital
gains
tax
include
selling
cryptocurrencies
for

fiat
currency
and
sending
cryptocurrencies
with
a
value
of
more
than
$15,000
as
gifts.
You
would
understand
the
need
to
track
crypto
transactions
for
taxes
by
learning
that
buying
any
product
or
service
with
cryptocurrencies
is
also
eligible
for
capital
gains
taxes.

Swapping
or
trading
one
cryptocurrency
for
another
asset
also
invites
capital
gains
taxes.
For
example,
you
would
incur
capital
gains
taxes
for

buying
NFTs
with
cryptocurrencies.
Therefore,
it
is
important
to
ensure
the
accurate
tracking
of
all
crypto
transactions,
as
declarations
of
capital
losses
can
alleviate
capital
gains
tax. 

• 
  Income
  Taxes

Income
tax
is
also
an
important
aspect
of
cryptocurrency
transactions.
It
is
applicable
to
the
financial
rewards
from
staking
and
mining
tokens.
With
the
right
Bitcoin
transaction
tracker,
you
can
keep
an
eye
on
all
the
transactions
that
qualify
for
income
taxes.

First
of
all,
you
would
have
to
pay
income
tax
to
receive
cryptocurrency
through
airdrops.
It
is
also
important
to
note
that
income
tax
is
applicable
to
cryptocurrencies
when
you
earn
interest
from

DeFi
lending
protocols.
If
you
receive
cryptocurrencies
as
payment
for
your
work,
then
the
transaction
would
be
eligible
for
income
tax. 

• 
  Long-Term
  Cryptocurrency
  Taxation 

Another
crucial
aspect
that
you
must
keep
in
mind
before
tracking
cryptocurrency
transactions
is
the
duration
of
ownership.
IRS
implements
long-term
crypto
tax
rates
for
gains
on
cryptocurrencies
that
you
have
owned
for
more
than
a
year.
If
you
file
taxes
as
a
single
individual,
then
you
don’t
have
to
pay
any
tax
on
gains
measuring
up
to
$44,625.
On
the
other
hand,
married
people
or
heads
of
household
would
have
to
pay
taxes
ranging
from
0%
to
20%,
depending
on
the
income
tax
brackets.

• 
  Short-term
  Cryptocurrency
  Taxation 

Tracking
your
crypto
transactions
also
requires
emphasis
on
learning
about
short-term
gains.
When
you
achieve
profits
on
trading
or
selling
cryptocurrencies
that
you
held
for
less
than
a
year,
you
will
have
to
pay
according
to
short-term
crypto
tax
rates.
The
short-term
crypto
tax
rates
vary
from
10%
to
37%
according
to
income
brackets
for
heads
of
household,
single
filers,
and
married
coups
who
choose
joint
filing. 

Excited
to
learn
the
basics
of
cryptocurrency
and
the
ways
in
which
blockchain
technology
empowers
cryptocurrencies,
Enroll
now
in
the Cryptocurrency
Fundamentals
Course

Which
Cryptocurrency
Transactions
are
Tax-Free?

The
confusion
about
finding
the
answers
to
“How
to
track
crypto
transactions?”
for
taxation
in
the
US
would
draw
attention
towards
transactions
that
are
not
eligible
for
income
tax
or
capital
gains
tax.
Here
is
a
list
of
crypto
transactions
that
are
not
taxable
in
the
US.

• 
  Holding
  ownership
  of
  cryptocurrencies
  without
  sales. 
• 
  Developing
  new
  NFTs.
• 
  Transferring
  cryptocurrencies
  between
  your
  own
  wallets. 
• 
  Giving
  cryptocurrency
  that
  amounts
  to
  less
  than
  $15,000
  as
  gifts.
• 
  Donation
  of
  cryptocurrencies
  to
  charities.
• 
  Using
  fiat
  currencies
  to
  buy
  cryptocurrencies.

Start
learning
about
cryptocurrencies
with
world’s
first Cryptocurrency
Skill
Path with
quality
resources
tailored
by
industry
experts!

Which
Platforms
Can
Help
You
in
Tracking
Crypto
Transactions?

You
must
ensure
accurate
tracking
and
reporting
of
all
cryptocurrency
transactions
alongside
consulting
with
a
tax
professional
to
address
all
tax
obligations.
Rather
than
using
a
crypto
wallet
transactions
tracker,
some
users
can
opt
for
screenshots
of
the
transactions
they
make
in
a
year.
However,
some
people
may
experience
trouble
in
recording
crypto
transactions
across
all
platforms.
Therefore,
you
should
choose
special
crypto
tax
software
that
can
help
you
track
crypto
transactions
and
generate
accurate
reports.

Some
of
the
most
popular
options
among
such
software
include
Accointing,
Koinly,
and
CoinLedger.
The
uses
of
these
tools
are
not
similar
to
those
of
a
Bitcoin
transaction
tracker,
and
they
serve
distinct
purposes.
Interestingly,
all
of
these
tools
help
in
tracking
crypto
transactions.
You
can
also
go
for
a
DIY
approach
with
the
following
step-by-step
guide
to
track
and
report
crypto
transactions.

• 
  Begin
  with
  identification
  and
  classification
  of
  all
  crypto
  transactions,
  including
  sales,
  trades,
  and
  purchases.
  You
  must
  prepare
  a
  list
  of
  the
  type
  of
  cryptocurrency,
  date
  of
  transaction,
  amount,
  and
  value
  at
  the
  time
  of
  transactions.
  It
  is
  also
  important
  to
  note
  the
  important
  wallet
  addresses. 
• 
  Determine
  the
  cost
  basis
  for
  every
  transaction,
  including
  the
  fees,
  purchase
  price,
  and
  other
  associated
  costs.
• 
  Find
  the
  profit
  or
  loss
  on
  the
  transactions
  by
  calculating
  the
  difference
  between
  fair
  market
  value
  and
  the
  cost
  basis
  of
  the
  cryptocurrency.    
• 
  Differentiate
  the
  short-term
  from
  the
  long-term
  transactions
  depending
  on
  the
  duration
  of
  ownership
  of
  the
  cryptocurrencies. 

Want
to
get
an
in-depth
understanding
of
crypto
fundamentals,
trading
and
investing
strategies?
Enroll
now
in
the

Crypto
Fundamentals,
Trading
And
Investing Course.

How
Can
You
Report
Cryptocurrencies
in
Your
Taxes?

The
steps
to
track
crypto
transactions
for
taxes
should
be
followed
by
the
best
practices
to
report
cryptocurrencies
in
your
taxes.
You
can
use
the
crypto
tax
form
8949
to
report
the
sales
and
disposal
of
capital
assets,
such
as
cryptocurrencies.
The
form
includes
two
parts,
distinctively
for
short-term
and
long-term
disposals.
You
would
also
have
to
select
option
C
on
form
8949
to
report
short-term
transactions.

In
the
next
step,
you
can
report
your
crypto
income
on
Form
1040.
You
can
use
Schedule
C
of
Form
1040
to
report
crypto
earnings
as
a
business
through
payments
for
labor,
staking
income,
or
mining
income.
Keep
in
mind
that
you
can
also
report
crypto
income
from
forks,
airdrops,
or
other
sources
in
Schedule
1
of
Form
1040.

Final
Words

The
challenges
for
implementation
of
taxation
on
cryptocurrencies
revolve
primarily
around
the
pseudonymous
nature
of
crypto
assets.
It
is
important
to
learn
the
best
practices
for
tracking
cryptocurrency
transactions
alongside
the
functionalities
of
tools
for
tracking

crypto
transactions
and
taxes.

The
complexity
of
cryptocurrencies
and
the
continuous
innovation
have
created
troubles
for
regulators
and
policymakers
in
the
domain
of
cryptocurrencies.
However,
you
should
understand
that
cryptocurrencies
are
also
subject
to
taxes
such
as
capital
gains
taxes
and
income
tax.
Learn
more
about
the
best
tools
to
track
your
crypto
transactions
and
make
the
most
of
crypto
taxes
now.

*Disclaimer:
The
article
should
not
be
taken
as,
and
is
not
intended
to
provide
any
investment
advice.
Claims
made
in
this
article
do
not
constitute
investment
advice
and
should
not
be
taken
as
such.
101
Blockchains
shall
not
be
responsible
for
any
loss
sustained
by
any
person
who
relies
on
this
article.
Do
your
own
research!