Skip to content

How to Report Cryptocurrency on Your Taxes

Rain Carlson
Rain Carlson
Accountant
Tons of people are finding huge financial success in the world of cryptocurrency these days. It’s a great way to make money, but given that crypto is still relatively new, reporting this income on your taxes isn’t exactly a clear process. I’ve put together this guide to eliminate your cryptocurrency tax reporting headache for the year, so read on to learn the right way to handle this process.

Cryptocurrency Tax Reporting in 3 Easy Steps

Though it may seem intimidating at first, reporting your income from cryptocurrency is similar to reporting other types of income on your taxes. Follow these steps and tax reporting will be a breeze:

  1. Figure out your gains and losses. You must ensure that you’re accounting for every transaction you made that involved cryptocurrency during a calendar year, whether you traded for another type of crypto, sold your crypto outright, or anything in between. Calculate the total amount that you gained or lost in each trade/sale of crypto and add it up to determine your net profit from crypto for the year.
  2. What tax form is your cryptocurrency activity reported on?. Form 8849 is the form you’ll use to report cryptocurrency sales. You must fill out all the information regarding your total gains and losses and the exact details of each transaction you made, including a description of the product and the dates you bought and sold it. Once you’ve finished, take the number of your net gain or loss from the form and add it into Schedule D, which is where you report all of your capital gains and losses in total. Once you’ve finished, take the number of your net gain or loss from the form and add it into Schedule D, which is where you report all of your capital gains and losses in total.
  3. Don’t forget to add all crypto income you received this year. It’s possible you were paid out in crypto at some point. This could be through mining crypto directly, getting a crypto bonus from your boss, or any other situation where you received crypto for your efforts. Report all of this crypto activity on your taxes.

Do I need a specialized software to keep track of crypto transactions?

There are various crypto software on the market and these can definitely cut down on the time needed to accurately record your crypto transactions. The important thing to remember is that  your crypto transactions are being imported correctly. Always double-check; if you’re not sure, hire a professional.

Rain Carlson
Written by

Rain Carlson

I help business owners get peace of mind through best accounting systems implementation, strategic planning and tax services, empowering clients to focus on the growth and development of their business and make well-informed decisions.