How to determine if you owe crypto taxes

You owe crypto taxes if you spend your crypto and it has increased in value from when you first bought it. Here are the different types of taxable events for cryptocurrency transactions:

• Selling cryptocurrency for a fiat currency
• Using cryptocurrency to purchase goods or services
• Trading different type of cryptocurrency

These are only taxable events if the value of your crypto has gone up. To determine if you owe crypto taxes, you need the cost basis, which is the total amount you paid to acquire your crypto. Then you compare that to the sales price or proceeds when you used the crypto.

Let’s say you previously bought one bitcoin for $20,000. Here are examples of taxable events:

• If you sell one Bitcoin for $50,000, you’d report $30,000 in gains.
• If you use one Bitcoin to purchase a $45,000 car, you’d report $25,000 in gains.
• If you trade one Bitcoin for $60,000 of another cryptocurrency, you’d report $40,000 in gains.

Trades between coins are where crypto taxes get complicated. A crypto trade is a taxable event. If you trade one cryptocurrency for another, you’re required to report any gains in U.S. dollars on your tax return.

Every time you trade cryptocurrencies, you need to keep track of how much you gained or lost in U.S. dollars. That way, you can accurately report your crypto gains or losses. If you’d rather keep it simple, cryptocurrency stocks could make it easier to track gains and losses compared to buying and selling specific coins.