Now Coinbase Can Help you Calculate Your Cryptocurrency Taxes in Three Simple Steps
Making filing taxes for digital currencies easier
Coinbase has just announced new tax tools on its portal to make reporting easier. Since filing taxes for digital currencies can be complicated, Coinbase has crafted a tool that you and your tax professional can reference to prepare your tax filing. The tool lets its users calculate their gains or losses on digital assets investments in three simple steps.
Helps establish a complete view of the users’ trading activity to determine his / her cost basis. The report generated provides the cost basis for all Coinbase purchases and proceeds of sales of cryptocurrency on Coinbase, inclusive of Coinbase fees. This information helps determine gain / loss on investment.
Once the cost basis is established, the Coinbase tax tool calculates respective gain / loss on investment and trading activity. Accordingly, gains or losses are calculated by subtracting the cost basis from the proceeds for each individual sale or exchange. Two common approaches used in this regard are:
- FIFO – Under the ‘first in first out’ method, it is assumed that the first assets you purchased are also the first assets you sold or exchanged.
- SpecID – the ‘specific identification’ method requires investors to specifically identify to their tax professional the assets they sold or exchanged.
Simply adding the gains / losses from all of your sales and exchanges gives your total gain / loss for the year.
Once the total gain / loss for the year has been calculated, investors can use this information and / or consult their tax professional to file their taxes.
Coinbase has also come up with a tool that automatically calculates your gains or losses based on a first-in-first-out (FIFO) accounting method. However, this tool is for customers who have only bought or sold digital assets on Coinbase. Users who have been transacting exclusively through Coinbase can generate their report here.