The contagion effects from the FTX downfall continue, with more providers like BlockFi going into bankruptcy and leaving investors with potential losses.
Other crypto providers like Genesis are leading millions unpaid to investors, while bankruptcy procedures could leave investors waiting and uncertain about the future.
Today, we cover how to calculate your crypto losses, if you can claim a write-off from losses associated with the fallout of BlockFi, and how to report your taxes from BlockFi trading.
In this article:
Do you pay taxes on BlockFi?
In the US, If you’ve used BlockFi by trading any crypto or earning crypto interest, you’ll have taxable events that you must report in your taxes.
If you earned interest on BlockFi, you would have to pay income taxes over those crypto rewards, even if you had losses.
Whereas, if you traded cryptocurrencies on BlockFi, you’ll be subject to capital gains taxes and need to report them on the right tax forms.
Do I have to pay taxes if I lose money trading on BlockFi?
If you traded digital assets on BlockFi and had losses in 2022, you won’t have to pay taxes over those losses, but you’ll have to report them.
In the US, you must report crypto gains and losses on Form 8949, including other information that CoinTracking can simplify.
Do I have to pay taxes on earned interest from BlockFi that hasn’t been paid?
If you received crypto interest in your BlockFi account, you must report that income based on its Fair Market Value (in USD) at the time you received it.
Even if you haven’t been able to withdraw that income from BlockFi, you would still have to pay income taxes on that crypto interest since you have received it and were in full possession and control over it.
Can you claim a deduction from BlockFi losses?
In the US, you can make a deduction of up to $3,000 net loss each year after using your losses against other gains that you may have from crypto or stocks.
However, if due to the BlockFi bankruptcy, you’ve tied up funds in your account, you’ll have to wait until the end of that insolvency process and for the payout to each customer before claiming a loss deduction for the funds you cannot recover.
Does BlockFi report to the IRS?
Any crypto provider, including BlockFi, serving US customers is subject to an inquiry from the IRS and may have to provide customer information to tax authorities.
How to report BlockFi trades?
You can use a crypto tax software like CoinTracking to import your BlockFi trades, get your gains/losses, and include them in compliant tax reports.
Here’s how to export your BlockFi trades and import them into CoinTracking:
1. Login into your BlockFi account and scroll down the page until you get to “transactions”
2. Click on “Type,” select all accounts (check boxes) and the transaction types you would like to export
3. Select the date range you wish to export
4. Click “download” and upload the CSV file here
How to do your BlockFi taxes?
If you traded crypto on BlockFi, you’ll have to determine your capital gains and losses and report them on Form 8949 and Schedule D of your Form 1040.
Additionally, if you’ve earned crypto interest, you would have to report it on your US individual income tax return (Schedule B).
If you’ve received crypto loans from BlockFi, you don’t need to do any extra crypto tax reporting.
The best crypto tax software: CoinTracking
The best crypto tax software in the market is CoinTracking.
You can import your trades using CSV or API, track your gains/losses, and generate tax reports according to your preferred accounting method.
CoinTracking is your full crypto tax solution for:
DeFi and NFT support with our ETH+DEX importer.
Importing your Binance Chain, Binance Smart Chain, and MATIC transactions.
25+ advanced reports, including which coins offer you a tax-free rate.
Automatic capital Gains, according to 12 accounting methods (e.g., FIFO, LIFO, HMRC, ACB), accepted worldwide.
Generating complete Tax Reports in your country.
Moreover, CoinTracking can easily classify all your earnings from yield farming, liquidity pools, crypto staking, and much more.
Crypto taxes with no errors: CoinTracking Full Service in the US
CoinTracking also offers a Full Service for US traders. A crypto reconciliation tax expert from Polygon Advisory Group, a leading US crypto tax firm, will review your CoinTracking account, help fix any errors, and ensure you submit your crypto tax reports error-free.
Do you have any crypto tax questions? Check the best guides:
How are rebase token protocols taxed?
Do you pay taxes on fan tokens?
Do you pay taxes when trading stablecoins?
How is Yield Farming Taxed?
DeFi Taxes: The Complete Guide.
How to save taxes with a Bitcoin IRA.
Do you pay taxes for receiving Bitcoin tips?
Uniswap Taxes Guide
How to calculate taxes with Bitcoin dollar-cost averaging?
FIFO for crypto taxes? Implications of accounting methods.
NFT Taxes: The Complete Guide.
Is Bitcoin taxable? The ultimate guide for 2021 taxes.
This post is part of the Crypto Taxes AMA series. Follow our weekly AMAs on Twitter where our expert CPA, Sharon Yip answers your crypto tax questions. You can download 35+ AMA crypto tax reports for free.
Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.