So How Do I Calculate My Crypto Taxes?

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So you’re ready to do your crypto taxes for 2018. Let’s get started, but first a moment of silence for our portfolios.

(Just a joke. I’m long crypto. Very speculative right now. Only invest what you can afford to lose.)

To start, make sure you know your cost basis for each purchase that you have made, not per BTC, ETH, or XRP value, but per USD. So, if you purchased some VEN with BTC back in January, you’ll need to convert that BTC purchase value to USD value, so you’ll need to look up the exchange rate value on that date. Being crypto, you’ll also want to look up the value at that time of day too.

Then, if you subsequently sold any of it, you’ll have to calculate the value back through BTC to USD to determine the USD selling price. And then, if you had multiple transactions of BTC for VEN, you’ll need to determine which lot your sale came from. And that will change depending on which costing method you use, FIFO (first-in, first-out), or LIFO (last-in, first-out).

You’ll also probably want to calculate the cost of all your fees, which are usually given in the denomination of the coin purchased, so you’ll have to do the USD comparison for those too.

And make sure you do all the above calculations for every coin and every combination of coin that you sold in 2018.

Sound impossible?

When I started looking for software to do this back in 2017, I assumed that there would already be something out there. Necessity being the mother of invention and all. But it took me a while to find this. I came across certain products that seemed like they could do the trick, but they were priced in terms of BTC which was exploding in value, and the BTC cost ratio had not been adjusted, so the software cost was exploding too. And, admittedly, some of them had cool portfolio management features but I didn’t need that. I just needed to do my taxes without spending a month locked in my room looking at historical pricing tables.

Then I found bitcoin.tax.

Way cheaper than the alternatives. Easy to import from each exchange, with specific, easy-to-follow instructions for each. Flip between FIFO and LIFO at the click of a button. Does every calculation for you. Export to spreadsheet and give to your accountant, or do it yourself.

I used it mid-year to determine some tax harvesting decisions, and just now finished 2018 in thirty minutes.