Calculators for crypto taxes operate by obtaining information from your exchanges, accounts, and other sites for storing cryptocurrencies. Based on this information, they calculate the gains, losses, and revenue from your financial activity.
To make it easier to file your taxes, gains or losses are computed in your country’s fiat currency (such as the Australian Dollar). Crypto fans utilise crypto tax calculator worldwide to simplify filing cryptocurrency and bitcoin taxes.
What is a calculator for cryptocurrency taxes?
A crypto tax calculator is a tool that estimates how much tax an individual will be required to pay on the profits from cryptocurrency transactions. This can be very advantageous for crypto investors.
Qualifications to Use the Cryptocurrency Tax Calculator
To use this calculator, you need to own at least one online virtual asset, such as NFTs or a cryptocurrency (such as Bitcoin, Dogecoin, Ethereum, etc.). You need to know the purchase price and market worth of the virtual currencies you own.
How Do You Use a Calculator for Cryptocurrency?
Step 1: Choose the tax year for which you want to estimate your taxes.
Step 2: Decide how you will file your taxes.
Step 3: Input the price of the buy and selling.
Step 4: Determine the crypto tax
The Fundamentals of CryptoTax
The Australian Taxation Office (ATO) divides cryptocurrency users into three categories for taxation purposes.
- Crypto traders conduct routine, systematic, and professional-like commercial trading activities (i.e., for a profit). This implies that they maintain accurate records and make significant financial investments.
- Those that invest in cryptocurrencies do so using a buy-and-hold approach that is more long-term.
- An exception is created for personal usage when you use cryptocurrencies for transactions, as with any other currency. In other words, you’re spending little more than AUD 14,684 on products and services.
Valuable Features of the Calculator
- Gain on cryptocurrency transactions can be determined instantly.
- Utilising the crypto tax calculator is easy and can be done anywhere, including from the comfort of your home.
- You may see your tax liability in real-time when you buy and sell cryptocurrencies.
Income Tax for Crypto Traders
If you meet the ATO’s definition of a crypto trader, you must pay income tax on a business-like basis. Be sure to read the ATO instructions since this applies to crypto mining, airdrops, lending money, margin dealing, and other categories.
In this situation, you will be required to pay corporate or personal income taxes on profits resulting from your advances.
You would be subject to Capital Gains Tax as a cryptocurrency investor (CGT). Several CGT occurrences result in taxation, including
- Dealing and converting cryptocurrencies, like purchasing one cryptocurrency with another,
- Converting cryptocurrencies into fiat money, like AUD
- You are purchasing goods or services with a cryptocurrency unless it is for personal use.
- Buying or giving cryptocurrency
- Special occasions, like forks in the blockchain that cause airdrops
Reporting and Keeping Records
Whether your crypto exchange counts as trading or investing, all will be included in your yearly revenue and must be disclosed as necessary. For this reason, you should meticulously record each exchange, including the dates, AUD value at every date, other involved parties, and the intended outcome of each trade.
The tax laws that apply to your tax band will apply to the income from trading in securities or making investments. At this point, for assistance with your computations and reporting, consult a professional or carefully review the ATO recommendations.
A clever piece of software called Cryptocurrency Tax Calculator makes understanding your complex cryptocurrency transactions simple. To assist you in determining your tax liabilities, it decodes the information you supply from numerous blockchains and thousands of transactions and wallets. This guarantees the accuracy of your statistics and motivates you to review complicated transactions to ensure they are all reported accurately.