Getting Started with Crypto Taxes

Cryptocurrency is treated as property in most jurisdictions, which means every transaction can have tax implications. This includes buying, selling, trading, staking, and even spending crypto. Understanding these requirements is essential for staying compliant and avoiding penalties.

Different activities trigger different tax events: selling crypto for fiat (USD, EUR, etc.) creates a capital gain or loss; trading one crypto for another is taxable; receiving crypto as income (staking, mining, airdrops) is taxed as ordinary income; and using crypto to purchase goods or services also triggers a taxable event.

Accurate record-keeping is the foundation of crypto tax compliance. You need to track the date, type of transaction, amount, value in your local currency at the time of transaction, and any fees paid. Taxxy can automatically import transactions from 55+ exchanges and 120+ blockchains to create a complete picture of your activity.

The cost basis is what you paid for your cryptocurrency. When you sell, the difference between your cost basis and the sale price determines your gain or loss. Common methods include FIFO (First In, First Out), LIFO (Last In, First Out), and Specific Identification. Different methods can result in different tax outcomes. Taxxy currently uses FIFO as the primary method.

In many countries, assets held for less than one year are considered short-term and taxed at ordinary income rates. Assets held longer than one year are long-term gains, often taxed at lower capital gains rates. The holding period can significantly impact your tax bill.

Staking rewards, mining income, and airdrops are generally treated as ordinary income at fair market value when received. This income must be reported in the tax year you received it, even if you haven't sold the tokens yet.

DeFi activities like liquidity provision, yield farming, token swaps, and NFT transactions all have tax implications. Each interaction with a smart contract can be a taxable event. Taxxy automatically identifies and categorizes these transactions using advanced DeFi event parsing.

Taxxy connects to 55+ exchanges and 120+ blockchains to automatically import all transactions. The platform calculates gains and losses using FIFO cost basis, categorizes income vs. capital gains, handles DeFi and NFT transactions, and generates tax reports optimized for 17+ jurisdictions including official PDF form filling.

Start by connecting your wallets and exchanges in the Dashboard. Taxxy will automatically sync your transaction history using direct exchange APIs and blockchain explorers. Review and categorize any uncategorized transactions, then generate your tax reports before your filing deadline.