Bitcoin Tax Calculator – Calculate Tax on Your Bitcoin With These softwares

Cryptocurrencies such as Bitcoin are treated as property under federal tax law in the United States. Tax principles that apply to property transactions also apply to the trade or sale of cryptocurrencies. Cryptocurrency transactions are subject to capital gains, just like property.

These must be reported on the 8949 form. A capital gain occurs in the following cases.

  • When cryptocurrencies are sold for FIAT currencies. 

  • When cryptocurrencies are used to pay for goods and services

  • When cryptocurrencies are traded for other cryptocurrencies

Capital gains do NOT occur in the following scenarios: 

  • When cryptocurrencies are donated to tax-exempt charities or organizations

  • When cryptocurrencies are transferred between wallets you own

  • When cryptocurrency is purchased with a fiat currency

  • When small amounts of cryptocurrencies are gifted (under $15k)

  • When you lend your crypto coins

  • When cryptocurrencies are received from mining and hard forks. 

When applied to cryptocurrency, capital gains are relatively simple to navigate. If the purchased cryptocurrency increases in value, the profits generated are considered a capital gain. If your cryptocurrency decreases in value, the losses incurred at the time of the sale can be deducted against your other capital gains to minimize tax. 

It is essential to note that capital losses can be deducted against ANY capital gains. Capital losses can be deducted from capital gains made on other assets. On the off chance that you incur a loss in a cryptocurrency transaction, you can mitigate the damage by having it deducted from your capital gains on property. 

All capital gains are declared on the 8949 form. You will need to have an accurate record of every cryptocurrency transaction to calculate your capital gains accurately and to avoid overpaying your taxes. 

This is usually the most challenging part while filing your crypto taxes. To avoid the unnecessary hassle of having to calculate the taxes manually, consider using a crypto tax calculator like a bitcoin tax calculator. 

Bitcoin and its history

Bitcoin first appeared on the scene in 2008. It was created by a person or organization named Satoshi Nakamoto. The technical outline for this cryptocurrency was designed but wasn't launched until 2009. 

In 2009, Bitcoin became the first cryptocurrency to hit the market. Since the announcement of Bitcoin in 2009, there has been a massive increase in the number of cryptocurrencies in the market.

Some of the cryptocurrencies are Litecoin, Zcash, and Dash. For the first three years, Bitcoin was used only for private exchanges. However, in 2012, WordPress became the first company major company to accept Bitcoin payments.

Bitcoin and its legality in India

If you're an Indian resident, it is vital to understand the legality of Bitcoin in India before we talk about calculating your Bitcoin taxes using a bitcoin tax calculator. 

The RBI's stance on Cryptocurrencies

It is fair to say that the RBI and the rest of the regulatory authorities in India have never seen Cryptocurrencies in a positive light. Their lack of coherent regulations in the past can be considered a testament to this. 

In December 2013, the RBI issued a press release, in which they cautioned the users, holders, and traders of cryptocurrencies about the potential risks that come with cryptocurrencies. 

Numerous cryptocurrency agencies operating in India shut down their operations following this press release. Subsequently, the RBI released a white paper where it explained how it intended to treat cryptocurrencies.  

The white paper released mentioned that cryptocurrencies were volatile and were not backed by any authority. They also said that cryptocurrencies lacked intrinsic value. Apart from this, they maintained that cryptocurrencies prove to pose a threat to the Indian monetary policy. In all fairness, they also highlighted the benefits of cryptocurrencies and block-chain technology in the white paper. The RBI expressed its interest in the idea of developing a national digital currency, following Canada's model for the same. 

The RBI's ban on cryptocurrency exchanges and related businesses from availing access to banking channels in India has already resulted in the shutdown of the operations of several entities over the last year. 

This is coupled with the release of a draft bill that proposes to criminalize the use and trade of cryptocurrencies. 

It is no surprise that these regulations have resulted in a drop in cryptocurrency trade and interest in India.

Unfortunately, the foreseeable future looks bleak for private cryptocurrencies in India. The IMC report noted that the development of the distributed ledger technology must be the focus of regulatory authorities in India. As mentioned earlier, the Government seems to be in favor of launching a national digital currency controlled by the RBI. 

One can expect clarity on cryptocurrency laws after the conclusion of the parliament's winter session, where the Government is expected to introduce the Crypto Bill.

Taxation of Bitcoin in the US 

In the United States, crypto assets are treated like stocks. That means they are taxed the same way stocks are taxed. 

If you plan to purchase a bitcoin and hold it for one year, you will be expected to pay long term capital gains when you sell it. 

Bitcoin Tax Calculators- 

These are some bitcoin tax calculators you can use: 

Bitcoin Taxes 

It is one of the most popular and well-known bitcoin tax calculators on the market. It allows users to import their cryptocurrency sales data throughout the year from a variety of exchanges. 

Zenledger

Zenledger makes for a great provider of tax calculation services. It enables crypto users to import the cryptocurrency transactions they have carried out and calculate their capital gains. 

Libra Tax

Libra Tax is a popular universal calculator. 

Crypto taxpayers can use the Libra Tax calculator without any payment for up to 500 transactions. Beyond that, you would require to purchase the paid subscription that allows you to track 5,000 sales. 

Conclusion

If you're fortunate to live somewhere where cryptocurrency regulations are favorable and precise, consider investing in cryptocurrencies because their value and role in the market are expected to go up. Irrespective of whether you're just a crypto enthusiast or you're a professional crypto trader, it would do you some good to use a bitcoin tax calculator. 

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Prateek Kulhari

Prateek is a business editor who writes about various topics such as technology, health and finance. At Pressly, he works along with the colourful folks that build a nation through tech startups. He is also a professional football player and video games enthusiast.

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Bitcoin Tax Calculator – Calculate Tax on Your Bitcoin With These softwares

by Prateek Kulhari time to read: 4 min
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