Filing your crypto taxes this year? The following step-by-step guide explains how to properly report crypto earnings in the US, UK, and Europe – plus, we compare some of the best tools to automate the process, save you tons of time, and possibly 0 Takeaways: Crypto is taxed as property in most 1 means you owe taxes only when you sell, swap, or earn crypto – not for just holding 2 events include crypto trading, mining, staking, airdrops, and token swaps. Donations, gifts, and transfers between your own wallets are usually 3 US, UK, and Europe apply distinct crypto tax rules: the IRS sees crypto as a digital asset, the HMRC splits taxes into income and capital gains, the EU countries follow individual frameworks under the MiCA 4 tax software such as Koinly, CoinLedger, CoinTracker, CryptoTaxCalculator, TokenTax, and others can automate reporting and save you a lot of time and 5 Crypto Taxation Quick Overview: Crypto taxes apply only to taxable events – such as selling, trading, mining, staking, token swaps, and 6 you simply hold crypto, taxes are not yet 7 types of taxes: income and capital 8 and mining incur income tax, the rest – capital gains 9 taxes are financial obligations that every taxpayer must cover based on their crypto transactions within a given tax 10 authorities in most jurisdictions treat cryptocurrency as property rather than 11 a result, they impose taxes on different crypto activities of citizens and residents in their 12 what crypto activities are taxable?
Most authorities classify the following activities as taxable events: Selling Staking Mining Trading Token swaps 13 means that you pay taxes when you use decentralized finance (DeFi), non-fungible tokens (NFTs), perpetual futures trading, and various other crypto 14 services that fall under the category of taxable events are subject to either capital gains or income 15 incur an income tax based on their income/salary/wages, or interest earned by 16 the crypto sphere, income taxes apply to activities such as staking and 17 gain tax applies to profits from selling a product or service. Hence, crypto users are subject to capital gains tax when they swap or sell their crypto 18 tax year, the tax authority in your country mandates that you submit a detailed tax report and pay your 19 report includes your crypto transactions to outline your profits, losses, and 20 that the beginning and ending of the tax year vary from country to 21 is important to note that you do not incur any taxation from simply holding a crypto asset.
Instead, you incur a tax debt when you sell or swap the cryptocurrency for a 22 that the crypto market is highly 23 a result, users may record losses on their crypto 24 such cases, tax authorities do not impose a tax on such crypto losses. Moreover, you can write off these losses and discount your taxable income. Additionally, under most jurisdictions, users are free from taxation when they donate crypto to a non-profit organization or a charity group, give or receive crypto as a gift, or send crypto to another account they 25 that out of the way, let’s move to how some of the major jurisdictions treat crypto 26 Taxes in the United States (US) Quick Overview: The IRS classifies cryptocurrencies as digital 27 means that all crypto transactions must be reported for tax 28 is taxed as ordinary income and crypto gains are taxed as capital 29 have to declare crypto activity each 30 tax year is from January 1st to December 31st, but the filing deadline is April 31 Form 8949 for sales/exchanges and Form 1040 Schedule 1 for income from mining, staking, or 32 Internal Revenue Service (IRS) is the government agency that oversees federal tax laws in the United 33 IRS classifies cryptocurrencies (including coins, tokens, memecoins, stablecoins, DeFi tokens, and NFTs) as digital assets, putting the asset class on par with other investment vehicles, such as stocks, bonds, and debt 34 a result, taxpayers are required to submit reports showing their crypto transactions during the tax 35 that the 36 year runs from January 1st to December 31st.
However, the deadline to file your taxes is April 37 to the IRS website , taxpayers must say YES or NO in their tax reports regarding whether they received, sold, exchanged, or “otherwise disposed of a digital asset.” The website also revealed that the basis for the taxable event (its cost) depends on the type of 38 most tax agencies, the IRS categorizes transactions into income and capital gains tax 39 regulator has various forms for different transaction 40 example, those who sold or exchanged crypto as a capital asset should fill Form 8949, while those who receive crypto as income from hard forks, mining, and staking should fill Form 1040 (Schedule 1).
There are also forms for those who received crypto as gifts, sold crypto to customers, and for employees or independent contractors who were paid in 41 42 authority also requires crypto users to report rewards from crypto airdrops, token incentive programs, referral bonuses, and other 43 are classified as 44 of 2024, the IRS has implemented the following structure for its tax rate:) or January 31st (online submissions) after the tax year 45 Majesty’s Revenue and Customs (HMRC) is the United Kingdom’s official tax authority that collects taxes from individuals and 46 most tax authorities, the HMRC splits crypto taxes between capital gain tax and income 47 capital gain tax, users must pay crypto taxes when they “dispose” of crypto 48 applies when they sell, exchange, use crypto to purchase an item, or give it to another individual.
However, this excludes gifts to their spouse, civil partner, or charity 49 income taxes, taxpayers are required to pay tax on interest earned on crypto holdings, staking and mining rewards, and salaries paid in 50 HMRC offers a tax-free 51 the 2024/2025 tax year, the government implements a tax-free allowance of £3,000 on capital 52 means that whenever a user’s total gain for the tax year is capped at £3,000 or below, they will pay no tax on their profits. However, they must pay capital gains tax of 18% to 25% when their transactions exceed the 53 also pay between 0%-45% income tax rate when they earn a personal allowance above £12,570, according to the official 54 UK government counts the tax year from April 6th to April 55 submitting their tax reports to HMRC on paper must do so before the October 31st deadline, while those reporting online have until January 31st, both after the tax year 56 Taxation in the European Union Quick Overview: Separate countries in the EU are responsible for their own tax rules but have to abide by 57 is the country with the most favorable tax rules.
Austria, Belgium, Denmark, and France are among the countries with higher crypto tax 58 European Union currently has a unified crypto-focused guideline, dubbed the Markets in Crypto-Asset (MiCA) 59 governs how all member states handle cryptocurrencies. However, the bloc has yet to implement tax rules determining how each member country treats crypto taxes. Currently, member states have unique tax regulations for their 60 is regarded as the European country with the most favorable tax 61 exempts capital gains on crypto held for over 12 months from taxpayers’ 62 encourages long-term 63 also offers tax-exempt amounts that favor crypto 64 countries with favorable crypto tax rules include Switzerland, Malta, Bulgaria, and Hungary.
Conversely, countries like Austria (a flat 27.5% rate on capital gain), Belgium (up to 33% on capital gain), Denmark (up to 53% for capital gain tax), France (a flat 30% tax rate for annual gain above €305), and Spain (between 19% and 28%) are known to have high crypto tax 65 most EU member states have their own crypto taxes, introducing a continent-wide crypto tax regime would be a 66 would reduce confusion, making it easier for governments and taxpayers to agree on one 67 tax rate could also be moderate —neither too high nor too low —benefiting government authorities and taxpayers 68 Crypto Tax Software Tools to Use As we mentioned in the start, using tools can help you 69 can: Save you countless of 70 you 71 72 all of your transactions and split them by transaction 73 profit and loss (PnL).
Categorize the outcome in respective tax brackets based on your current 74 ready-to-file reports, and even forms. So, if you live in any of the above regions, here is a comparative list of some of the best crypto tax software available to you. . cp-only-mobile ,
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