Everything regarding how your tax is calculated, including capital gain/loss & cost basis methods
How is my capital gain/loss calculated?
The actual calculation varies by jurisdiction, but the basic idea is simple. Your gains/losses are assessed by subtracting your cost basis and transaction fee from the FMV (fair market value) of the disposed crypto assets.
When your fee is in cryptocurrency, it should be valued at FMV and will separately result in a capital gain/loss as it is considered a disposition of capital property. It is evaluated based on subtracting the cost basis from the FMV of the fee. The total capital gain/loss will be the sum of both dispositions.
You can click on the transaction to expand the section where we explain to you in detail how your capital gain/loss is calculated.
There are however many other rules to consider in different countries, such as different cost basis to use. Please refer to our tax guidance for more information pertaining to your jurisdictions.
What is the cost basis used for the calculation?
Below are the common cost basis methods used for calculating taxes:
- First in, first-out (FIFO): Using first-in-first-out works exactly how it sounds. The first coin that you purchase (chronologically) is the first coin that is counted for a sale.
- Last in, first-out (LIFO): LIFO works exactly the opposite of FIFO. Instead of selling off the first coins you acquired, you sell the last coins that came in (i.e. the most recent coins you acquired).
- Highest in, first-out (HIFO): Highest-in first-out (HIFO) works exactly how it sounds. You sell the coins with the highest cost basis (original purchase price) first.
- Specific ID: With specific identification, you identify exactly which coin is being spent at transaction time. This can be ad-hoc or according to a pattern (e.g., highest-in-first-out [HIFO], last-in-first-out [LIFO], etc.). Crypto.com Tax doesn’t support this cost basis method.
- Share pool: This is specific to the United Kingdom. When you spend/sell/trade cryptocurrency, you will be treated as disposing them in the following order: 1. Same Day Rule: coins acquired on the same day as the disposal are consumed first; 2. Bed and Breakfasting Rule: coins acquired in the 30 days following the day of disposal (provided the person making the disposal was resident in the United Kingdom at the time of the acquisition) 3. Crypto-pool rule: all previous coins purchased, the price averaged
- Adjusted cost base (ACB): This is the method used by Canada. When you buy shares, the total ACB is recalculated to be the previous total ACB, plus the total cost of the new shares, plus any transaction costs
Crypto.com Tax currently supports the US and Canada, therefore the cost basis methods available are FIFO, LIFO, HIFO and ACB. We’ll continue to support more cost basis methods as our service expands to more jurisdictions.
Does your service work for businesses?
Unfortunately, Crypto.com Tax is designed to help retail users prepare their taxes resulting from crypto transactions. It is not tailored to business needs. Please consult tax professionals if you need any advice on crypto taxes for businesses.
What if I spot an error in the calculation?
Please contact us via the chat button, or report any error at [email protected], with the following information:
- Description of the error
- How to reproduce the error
- Crypto.com Tax CSV containing the required transactions
We’ll investigate the issue and get back to you as soon as possible.