Filing your taxes is already complicated, but it can be more confusing if you have bought or sold cryptocurrency. Whether you used an automated Bitcoin trading app or made the trades yourself, it will be much easier to figure out how much you owe with a crypto tax calculator.
But just having access to the crypto tax calculator isn’t necessarily enough. You also need to understand the basics of cryptocurrency taxation in your country. The following covers the most important information.
What I Should Know About Crypto Taxes
Before using our crypto tax calculator, make sure you understand how your country taxes your cryptocurrency trades.
This calculator was developed to give a general overview and information about taxes. Please talk with your accountant for legal needs.
Your cryptocurrency tax rate on federal taxes will be the same as your capital gains tax rate. As a refresher, short-term capital gains had a rate of 10 to 37% in 2021, while long-term capital gains had a rate of 0 to 20%.
The rate you pay on crypto taxes depends on your income level and how long you have held the crypto. Short-term capital gains apply to cryptocurrencies that you held for 365 days or less. There are seven possible tax rates for these. Long-term capital gains are those held longer than this. There are three possible tax rates for these. For both long- and short-term capital gain, the rate you pay depends on your income bracket.
You pay crypto taxes on selling crypto for fiat, buying goods or services with crypto, trading crypto, earning crypto interest, crypto from airdrops, crypto earned for tasks, crypto from liquidity pools and staking, and crypto mining.
When filing your taxes in Canada, you will treat your cryptocurrency like any other commodity or barter transaction. Canada divides crypto profits into either capital gains or business income, each with a slightly different tax rate. To qualify as business income, it typically requires repetitive processes. Examples can include running an exchange, crypto trading, and crypto mining.
It can be slightly challenging for Canadians to determine if their crypto is taxed as business income or capital gain. It will depend on numerous factors, including transaction frequency, period of ownership, knowledge of markets, and relation to other work.
As with most countries, the UK taxes crypto profits from nearly anything. This includes crypto from mining, confirmation rewards, salaries, and airdrops. The country requires residents to pay taxes on profits above £12,300. This includes cryptocurrency. If your profits from crypto are higher than the Capital Gains Tax allowance, you will pay either 10% or 20% on your taxes, as of the latest figures.
The Australian Tax Office classifies cryptocurrency as a “property” or a capital gains tax asset. As with most other countries, Australians calculate their taxes owed based on the fiat value of the crypto at the time of the transaction.
Like Canada, Australia distinguishes between crypto traders and investors for Capital Gains Tax. Most Australians are considered investors, especially if they use their chosen automated Bitcoin trading software as a personal investment.
It is also worth noting that you include capital gains from crypto trading in your tax return under your total income. Then your tax rate for the total income depends on your income bracket.
Like the United States, Australia also offers a discount for long-term crypto investments. This would come as a potential discount of up to 50% if you held the crypto for over 12 months.
Whether you use automated Bitcoin trading apps or research yourself, you likely still have a few questions about crypto taxation.
How Is Crypto Tax Calculated?
To use a crypto tax calculator, you should understand the basics of how crypto tax is calculated. Most countries require you to calculate what your crypto was worth at the time of purchase and the time of sale, in terms of the local fiat, to calculate taxes. From there, you calculate taxes on your profits just like any other capital gain tax would be.
How to Minimize Your Crypto Taxes
There are some strategies that you can use to minimize the results of using a crypto tax calculator, including:
- Hold the investment: The U.S. and Australia offer discounted taxes if you hold your crypto for over a year.
- Plan the sale based on your income: You get taxed on crypto the year you sell it. So, if you wait to sell it until a year with a low income, you may find yourself in a lower tax bracket.
- Tax-loss harvesting: Selling crypto at a loss intentionally to save on taxes by letting you claim capital losses.
- Give crypto gifts: There are no tax obligations in the U.S. for crypto gifts valued at $15,000 or less. This can include charitable donations.
- Invest using your retirement account: In the U.S., if you use your tax-deferred retirement account to trade crypto, you can delay tax payments.
I Lost Money Trading Cryptocurrency. Do I Still Pay Tax?
No, you only pay taxes on cryptocurrency profits. Just keep in mind that you may still have to list each cryptocurrency separately, so some may have gained profits while others have losses. However, most countries let you deduct the losses.
How Do I Calculate Tax on Crypto-to-Crypto Transactions?
To calculate tax on crypto-to-crypto transactions, you have to calculate the value of each crypto in fiat. Your tax authority wants to know your equivalent profits or losses in the local fiat (USD, GBP, AUD, or CAD).
Automated Crypto Trading With Haru
Now that you are clear on how to use our crypto tax calculator and what taxes you will pay on crypto, consider how you want to earn it. One of the simplest yet most effective methods is to use an automated Bitcoin trading app made by experts, such as Haru.
Haru Earn Explore, for example, lets you automate your investments with a professionally managed investment algorithm that runs 24/7. Haru Earn Explore lets you invest in BTC, ETH, or USDT with a target rate of 25%+, 21.5%+, and 22.5%+, respectively.