Tax implications for crypto

Discussion of all things crypto and blockchain.
jcz1
Posts: 4935
Joined: Sat May 28, 2011
Location: USA

Re: Tax implications for crypto

Postby jcz1 » Thu Feb 22, 2018

Is the rig used for mining perhaps considered as something that gets depreciated over so many years? If so, you can write off the cost of it, but only 1/5th per year, or however many years it is supposed to last.

User avatar
joefro
Site Tech
Posts: 3304
Joined: Fri Jan 06, 2012

Re: Tax implications for crypto

Postby joefro » Thu Feb 22, 2018

Lately we have been selling and turning over the rigs long before they depreciate. We are basically mining on our inventory as it is waiting to sell, which doubles as testing the hardware. Usually we don't hold the rigs for more than a week as we are constantly selling and rebuilding.

silverpv
Gold Supporter
Posts: 1423
Joined: Fri Jul 24, 2015
Location: Los Angeles

Re: Tax implications for crypto

Postby silverpv » Fri Feb 23, 2018

Long John wrote:Cointracker's transaction history (not the downloaded csv file) shows cost basis and gain/loss for a dated transaction. The spreadsheet download does not include this. Operating off the rather overwhelming spreadsheet alone, you would need to calculate the cost basis yourself, (and you would need to decide which transactions to use for First-In-First-Out, ugh). Cointracker's paid report does this for you.

Rather than use the spreadsheet, or buy the report, it might make sense to scroll down through the transaction pages, noting which ones show profit or loss and grab the numbers from only those, including cost basis, and file your crypto tax based on that. This would be fairly painless for most people and should show accurately your gain/loss on the year. You don't need the really granular stuff unless IRS demands it. They don't require supporting documentation with the 1040 return. Worse comes to worst, I'll pay the freaking $150. It would be cheaper than paying a CPA to untangle my mess.

Again, just thinking out loud and correct me if I'm wrong. This is not expert knowledge!

If they offer discounts to complainers, I would be surprised and impressed. I want in on that action. I wouldn't hesitate to pay $50 or even $70 for the detailed report on <1,000 transactions.

It's been nostalgic and fun to see what prices were back in the early part of last year.


I contacted them about this, they aren't planning to make a lower tier. Send them an email and ask. More of us who ask, the better. the range is a bit harsh but i'm in the same boat. I have 300 tx but have to pay $150 vs 100 at $30!!! feedback@cointracker.io

silverpv
Gold Supporter
Posts: 1423
Joined: Fri Jul 24, 2015
Location: Los Angeles

Re: Tax implications for crypto

Postby silverpv » Fri Feb 23, 2018

joefro wrote:Agree with all Nate. We actually just got our paperwork approved for an s-corp filing. Just waiting on the comptroller to contact us to set up the EIN for the taxes. We do plan to file quarterly and deduct the hardware costs. Besides just our own mining, this also includes the part of the business where we are building and selling rigs so filing as a corporation to deduct hardware costs is a must!


Best way to go. As long as you got all your documents together you're good. All standard deductions apply to operate the business. I'm going through LIFO towards the end of the year and try to save the mined coins as for later to get to 1 year. I'm running an S corp. Overall your tax responsibility will be less thanks to the current tax plan vs. individual.

Also agree with Nate.

User avatar
natsb88
Turtle Supporter
Posts: 5403
Joined: Sun Sep 20, 2009
Location: The Copper Cave
Contact:

Re: Tax implications for crypto

Postby natsb88 » Fri Feb 23, 2018

Yes, an S-corp is likely better now tax wise. It's just more complicated to set up and file compared to a sole proprietor or an LLC. Which route is better probably depends on how much profit you are making. If the numbers are substantial, an S-corp makes sense. If it's only a few grand, the tax savings may be offset by the additional paperwork and tax preparation.

User avatar
Long John
Turtle Supporter
Posts: 3756
Joined: Sun Feb 14, 2016
Location: Northeast

Re: Tax implications for crypto

Postby Long John » Thu Mar 01, 2018

I'm letting CoinTracker calculate my capital gains from crypto. It's free unless I want them to generate a form 8949, which is not required to send with the 1040. I allowed read-only API access to my accounts for the purpose.

My question is this. I can choose how CoinTracker calculates cost basis: First In First Out, Last In First Out, or Highest In First Out. Which is the most advantageous for tax purposes?

User avatar
joefro
Site Tech
Posts: 3304
Joined: Fri Jan 06, 2012

Re: Tax implications for crypto

Postby joefro » Thu Mar 01, 2018

Long John wrote:
My question is this. I can choose how CoinTracker calculates cost basis: First In First Out, Last In First Out, or Highest In First Out. Which is the most advantageous for tax purposes?



That will depend on whether you are trying to minimize taxes for this year and pay more in the future, or if you'd like to pay more this year and pay less in the future. In the end, it will all work out the same assuming you 100% cash out at some date in the future and your tax rate remains constant... it will just determine WHEN you pay. What is best for you depends on what you want to do, and also if you are dealing with gains vs losses, what the value was at the various times you bought all of the coins, etc... There is no black and white answer.

silverpv
Gold Supporter
Posts: 1423
Joined: Fri Jul 24, 2015
Location: Los Angeles

Re: Tax implications for crypto

Postby silverpv » Thu Mar 08, 2018

joefro wrote:
Long John wrote:
My question is this. I can choose how CoinTracker calculates cost basis: First In First Out, Last In First Out, or Highest In First Out. Which is the most advantageous for tax purposes?



That will depend on whether you are trying to minimize taxes for this year and pay more in the future, or if you'd like to pay more this year and pay less in the future. In the end, it will all work out the same assuming you 100% cash out at some date in the future and your tax rate remains constant... it will just determine WHEN you pay. What is best for you depends on what you want to do, and also if you are dealing with gains vs losses, what the value was at the various times you bought all of the coins, etc... There is no black and white answer.


Tax is not constant. I opted for highest in first out for this one to minimize taxes for 2017. 2018 should have a tax reduction because of the new tax plan. So deferring tax responsibility to 2018 should be better vs. paying the higher amount in 2017, IMO. I'm going to confirm with my CPA, but the difference is pretty dramatic. FIFO vs HIFO is almost 100% different in terms of gains. FIFO vs LIFO 70%, LIFO vs HIFO 12% difference. My strategy is to pay the least amount now, and higher amount when the tax rate is lower for 2018. This only works for 2017/2018 because of the change. Next year once we're on the new standard it'll all be the same.

User avatar
SilverDoge
Constitutional Supporter
Posts: 4724
Joined: Mon Apr 21, 2014
Location: Kansas

Re: Tax implications for crypto

Postby SilverDoge » Tue Mar 13, 2018

Image

User avatar
Brick's
Supporter
Posts: 2191
Joined: Wed Dec 19, 2012
Location: 'Cuse

Re: Tax implications for crypto

Postby Brick's » Tue Mar 13, 2018

Is this the company behind the tax calculator or is their calculator different?

https://www.hashchain.ca/cryptocurrency ... ax-season/

Hashchain Tech - KASH is one of a very small handful of Blockchain "penny stocks" I've been following/researching but not yet invested into.
“Rationality belongs to the cool observer, but because of the stupidity of the average man, he follows not reason, but faith, and the naive faith requires necessary illusion and emotionally potent oversimplifications which are provided by the myth-maker to keep ordinary person on course.”

― Reinhold Niebuhr, Moral Man and Immoral Society: Study in Ethics and Politics

silverpv
Gold Supporter
Posts: 1423
Joined: Fri Jul 24, 2015
Location: Los Angeles

Re: Tax implications for crypto

Postby silverpv » Tue Mar 13, 2018

SilverDoge wrote:Coinbase releases a tax calculator (finally).

https://www.coindesk.com/coinbase-eases-crypto-tax-procedure-with-gainloss-calculator/


You don't want FIFO man, not in crypto.. you want to keep those as long as possible.

User avatar
SilverDoge
Constitutional Supporter
Posts: 4724
Joined: Mon Apr 21, 2014
Location: Kansas

Re: Tax implications for crypto

Postby SilverDoge » Tue Mar 13, 2018

silverpv wrote:
SilverDoge wrote:Coinbase releases a tax calculator (finally).

https://www.coindesk.com/coinbase-eases-crypto-tax-procedure-with-gainloss-calculator/


You don't want FIFO man, not in crypto.. you want to keep those as long as possible.


Agree. Are you using software for the LIFO calculations?
Image

silverpv
Gold Supporter
Posts: 1423
Joined: Fri Jul 24, 2015
Location: Los Angeles

Re: Tax implications for crypto

Postby silverpv » Tue Mar 13, 2018

SilverDoge wrote:
silverpv wrote:
SilverDoge wrote:Coinbase releases a tax calculator (finally).

https://www.coindesk.com/coinbase-eases-crypto-tax-procedure-with-gainloss-calculator/


You don't want FIFO man, not in crypto.. you want to keep those as long as possible.


Agree. Are you using software for the LIFO calculations?


I used that site i mentioned cointracker.io and turned it into my CPA using HIFO. Highest in First Out. Already filed.

User avatar
Long John
Turtle Supporter
Posts: 3756
Joined: Sun Feb 14, 2016
Location: Northeast

Re: Tax implications for crypto

Postby Long John » Wed Mar 14, 2018

silverpv wrote:I used that site i mentioned cointracker.io and turned it into my CPA using HIFO. Highest in First Out. Already filed.

Did you end up paying the $150 to generate the 8949, or did you just take the (free) end result? My notion is not to pay the $150 since the 8949 is not required by the IRS up front.

By the way, I get the same capital gain for 2017 no matter which option I choose: FIFO, LIFO, HIFO. And since all my activity began within 2017, it's all marked by CoinTracker as short-term gains.

User avatar
Bucketeer
Bearish Supporter
Posts: 2866
Joined: Sat Aug 23, 2014
Location: Warily watching the herd.

Re: Tax implications for crypto

Postby Bucketeer » Wed Mar 14, 2018

Long John wrote:[By the way, I get the same capital gain for 2017 no matter which option I choose: FIFO, LIFO, HIFO. And since all my activity began within 2017, it's all marked by CoinTracker as short-term gains.


That's good info John.

The problem I have with trading is taxes. I could sell $5000 per year, without affecting my Social Security and Pension. After that, my monthly income will greatly reduced (SS). I'm kinda stuck with the income limitations of SS. That's why I'm HODLing.

It is kinda like PMs. If you don't need the money, just sit on it.
Gentlemen prefer Engelhard.

jcz1
Posts: 4935
Joined: Sat May 28, 2011
Location: USA

Re: Tax implications for crypto

Postby jcz1 » Wed Mar 14, 2018

Long John wrote:By the way, I get the same capital gain for 2017 no matter which option I choose: FIFO, LIFO, HIFO.


That doesn't make sense. Based on the price trajectory over the course of last year, your first-in would almost certainly be lower cost basis and therefore higher gain, compared to last-in. It sounds like the algorithm they are using is incorrect.

User avatar
Long John
Turtle Supporter
Posts: 3756
Joined: Sun Feb 14, 2016
Location: Northeast

Re: Tax implications for crypto

Postby Long John » Wed Mar 14, 2018

jcz1 wrote:That doesn't make sense.

No, it doesn't. Perhaps the non-default calculations work only if you buy one of CoinTracker's tax plans.

Recluse
Gold Supporter
Posts: 1280
Joined: Sun Jan 26, 2014
Location: Illinois

Re: Tax implications for crypto

Postby Recluse » Wed Mar 14, 2018

Long John wrote:And since all my activity began within 2017, it's all marked by CoinTracker as short-term gains.


So they were all held less than one year, right? If so it makes perfect sense to me. Maybe I missed your point.
ImageImage

silverpv
Gold Supporter
Posts: 1423
Joined: Fri Jul 24, 2015
Location: Los Angeles

Re: Tax implications for crypto

Postby silverpv » Wed Mar 14, 2018

Long John wrote:
silverpv wrote:I used that site i mentioned cointracker.io and turned it into my CPA using HIFO. Highest in First Out. Already filed.

Did you end up paying the $150 to generate the 8949, or did you just take the (free) end result? My notion is not to pay the $150 since the 8949 is not required by the IRS up front.

By the way, I get the same capital gain for 2017 no matter which option I choose: FIFO, LIFO, HIFO. And since all my activity began within 2017, it's all marked by CoinTracker as short-term gains.


I paid. I wanted to make it easy for my CPA because of some of my other stuff. He charges roughly the same rate per hr, plus it helps support the crypto ecosystem. I was working on a similar system and recognize the work involved in building and support the work.

If you get the same gain for each, click the option and come back 15-30 min later. It takes some time to process. It shouldn't be the same because HIFO, FIFO are very different. First in should be dramatically cheaper than Highest in First Out. For me it was double, unless you didn't buy much toward the end of the year.

I'm glad to have filed already, the tax changes for mortgage tax and all these other changes for 2017/2018 meant i had to be creative. Trying to get all the deductions in 2017 and defer income to 2018. Definitely feel fortunate to have sold what i did in the first couple months. It definitely looks like the bubble popped and we're going to go back to a more normal growth curve. I'd say we're in Fear/Capitulation. Thanks to some of you conservative guys strategy sharing, I pulled out my principal and some nice pocket change and let the rest ride, it friggin sucks to see NEO cut in half but what can you do. :roll: At this point, I'm going to wait it out and HODL. I just hope i have enough for NEXT years Tax payment but hopefully its at a lower rate.

Chaboo
Turtle Supporter
Posts: 358
Joined: Thu Oct 27, 2011

Re: Tax implications for crypto

Postby Chaboo » Sun Apr 01, 2018

Long John wrote:
silverpv wrote:Wanted to share this with you guys .... https://cointracker.io

Cointracker has a very useful FAQ on crypto taxes. https://www.cointracker.io/faq#section-tax

This part covers the most basic question most people have: What is taxable? (The one in bold corrects what I had thought I understood, that any transfer between wallets is a taxable event.)

Generally speaking, these are considered taxable events:
•Selling cryptocurrency for fiat currency (i.e. USD, EUR, JPY, etc.)
•Trading cryptocurrency for other cryptocurrency
•Using cryptocurrency to buy a good or service
•Receiving cryptocurrency as a result of a fork or from mining

On the other hand, the following are generally not considered taxable events:
•Buying cryptocurrency with fiat currency
•Donating cryptocurrency to a tax-exempt organization
•Gifting cryptocurrency to anyone (if the gift is sufficiently large it may trigger a gift tax)
Transferring cryptocurrency from one wallet that you own to another wallet that you own



I finally started looking at this closely and found that cointracker counted each time I sent to my wallet as a sale instead of a transfer. I went back and manually changed them as a transfer. My gains were cut in half as a result. :shock: I figured it'd add up, but ...HALF..... That's huge and well worth the few minutes to take a look at.
New to crypto, join coinbase and we both get $10 (after you spend $100) https://www.coinbase.com/join/58d979166908ae017761881d

Get cash back from Mr Rebates for shopping online.
http://www.mrrebates.com?refid=626685


Return to “Bitcoin/Crypto/Blockchain”

Who is online

Users browsing this forum: No registered users and 2 guests