We have collected some of the top tips for you to navigate the shaky waters of crypto and taxes.
Let’s discover the top 5 crypto tax tips for 2023 and help you this tax season!
In this article:
1. Be on top of crypto law changes in your country
We predict that some countries that were tax havens for crypto investors may introduce new crypto taxes. Examples of this are Italy and Portugal recently changing their crypto laws.
We encourage you to be on top of the news and consult your crypto tax professional when changes come into law to guarantee that you’re fully prepared for any situation. If you’re in Portugal and need to be on top of changes about crypto taxes, check our dedicated Twitter page for crypto tax in Portugal.
2. Companies need professional tools to manage new obligations
With new regulations worldwide, there are more compliance laws that crypto providers need to follow, and there is a need to pay more attention to any dealings with crypto.
We advise companies, crypto native or not, to carefully handle their crypto dealings, reach out to professionals, and start using tax tools designed for B2B, like CoinTracking, to start their tax and compliance crypto journey.
3. Liquidity is king
In a year where crypto markets are more volatile than ever, you may have taxable events that lead to big losses or significant gains. If you had big gains in a year but then suffered large losses the following year, you may not have enough liquidity to pay crypto taxes when they are due the next year.
Our top tax tip is to carefully plan your trades beforehand and put aside money for crypto taxes to avoid bigger issues when the crypto tax season comes.
4. Account for taxes and security amid a crypto winter
Many experts believe we will have a bear market this year, from crypto to equities. However, even in a crypto winter, there are many possibilities for profit.
Our main advice this year is to plan ahead on your crypto taxes and pay special attention to security. If you have gains, please account for crypto taxes in 2024, and be extra careful about how you store your crypto. Put your coins in a hardware wallet if you don’t plan to trade frequently to avoid hacking and losing your funds in case of an exchange shutdown.
5. Always keep your records
With many exchanges getting shut down or going through bankruptcy, it’s crucial to keep records. Make it a habit to regularly and frequently download and save your transaction history records. Better yet, use crypto tax software such as CoinTracking to connect your exchange and wallet accounts by API, enabling all of your transaction data to be automatically imported.
Remember, if you don’t keep good records, you will likely need to pay a lot more taxes than you should because the IRS rule will assume a cost basis of zero if you can’t prove your cost basis with a purchase record.
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.
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.