When it comes to taxes, the devil is in the details. If you don’t know your crypto tax liabilities, then you could be leaving money on the table. In this post, we will show you how to calculate your crypto tax liability with Koinly’s cryptocurrency tax calculator.
1: Enter Your Information
First, you will need to enter your information into Koinly’s cryptocurrency tax calculator. This includes your name, address, and taxpayer identification number.
2: Choose Your Cryptocurrency
Next, you will need to choose which cryptocurrencies you would like to include in your calculations. This includes both the traditional and digital currencies that are currently available on the market.
3: Input Your Taxable Income
Once you have chosen your cryptocurrencies, you can then start to calculate your taxable income. This will include all of the money that you have earned from these cryptocurrencies over the past year. You will also need to include any capital gains or losses that you have incurred during this time period.
4: Calculate Your Tax Liability
Finally, you will need to calculate your tax liability. This will depend on your taxable income and the applicable tax rates.
Koinly will calculate your tax liability using the following formula:
Taxable Expenses = Net Income – Taxable Income (Passive)
In this example, John has an annual salary of $50,000 and earns $10,000 in passive income from his cryptos each year. After entering his information into Koinly’s calculator, his taxable expenses would be $40,000 ($50k – $10k), resulting in a tax liability of $6,250.
Don’t worry though! Koinly also offers automatic tax calculations for most major cryptocurrencies.
5: Review and Save Your Results
Koinly has a great way to help taxpayers understand their cryptocurrency holdings and whether they are subject to taxation. Reviewing your results can help you save money on taxes, and may even allow you to claim a deduction.
Most crypto-related transactions are considered property transactions, which means that most of the taxes that apply to traditional property transactions also apply to cryptocurrency transactions. For example, capital gains and losses on crypto holdings will be taxable, as will any dividends or interest paid on those holdings.
It’s important to keep accurate records of all your cryptocurrency transactions in order to properly report them for tax purposes. Koinly’s crypto tax calculator offer built-in tracking features that make it easy to keep track of all your investments.
With our simple guide, you can easily calculate your crypto tax liability! We hope this helps you better understand your holdings, and that our crypto tax calculator can save you some money on taxes.