Users entering the crypto world often find it tiring to calculate taxes payable on crypto income. Calculating and filing taxes can be quite complex, especially if users have transacted in more than one country. Koinly eliminates all these complications by automatically consolidating the user’s transactions in one place and helping them report their taxes instantly.
Koinly is a game-changing tax software that streamlines and simplifies cryptocurrency tax returns. The software automatically calculates users’ capital gains and generates a tax report when they link their crypto exchange accounts.
Koinly supports over 17,000 cryptocurrencies, 350+ exchanges and 50 wallets, more than most of its competitors. This means users can link all their accounts to Koinly and get a centralized view of their crypto assets and transactions.
Crypto Tax Loss Harvest
Every time users sell, trade, spend, or even gift a cryptocurrency (depending on their place of residence), the tax office sees it as a disposal of a capital asset and as a result, users incur a capital loss or capital gain.
If users earn a capital gain, they will have to pay Capital Gains Tax on the profits they disposed of, and they will not have to pay taxes on it if they experience a capital loss. When users file their taxes as part of their annual tax returns, they deduct their net capital losses from their net capital gains, and the remaining amount after that is the amount they will pay the Capital Gains Tax.
Crypto tax loss harvesting occurs when an investor sells cryptocurrency at a loss to generate a capital loss that can offset against capital gains and reduce the overall tax burden. Users can then buy the asset back to HODL at a discounted price for later earnings.
Users can track their taxable gains throughout the year by tracking unrealized losses and realized gains and look for loss-making opportunities to offset them.
Crypto wash sales
A crypto wash sale is when an investor sells a crypto asset at a loss to create a real loss, and then buys the same asset back at a lower price before the market changes again, creating an artificial loss that can be used to reduce their taxes. invoice.
But tax authorities around the world are sending a clear message that crypto investors should pay taxes on their crypto earnings, and have set very strict rules to prevent investors from chasing artificial losses.
Each country calls these rules differently, in Australia it is known as the wash sale rule.
Australian Crypto Washing Sell Rule
this Australian Taxation Office (ATO) It has a tax loss sales rule for capital assets. The Australian wash sale rule applies when an investor sells an asset at a loss and buys the same asset with tax benefit intent. Unlike many other tax offices, the ATO does not specify an exact time, but instead specifies various factors that can constitute a wash sale.
If users are deemed to have made a washing sale, capital losses arising from these transactions cannot be claimed and cannot be deducted from capital gains. The ATO has not specifically stated that these rules apply to crypto, but these are general Capital Gains Tax rules and crypto assets are subject to CGT rules.
The ATO issued a warning to taxpayers in June 2022 asking them not to sell washes, implying that it would be a priority for them this tax year. According to the ATO, taxpayers who sell washes are at risk of swift compliance action and potentially facing additional taxes, interest and penalties.
Deputy Commissioner Tim Loh said:
“Don’t hang yourself to dry by having a wash sale. We want you to count your losses, not eliminate them by the ATO.”
Australia’s Capital Loss Limit
Inside Australia, Users can use capital losses to offset capital gains. Although there is no limit, customers are required to spend all capital losses each year before moving any further. As a result, users are not allowed to carry forward capital losses if they still have net capital gains for that fiscal year.
If users have capital losses greater than they can handle in a single fiscal year, they can roll over their capital losses indefinitely to future fiscal years.
Harvest history of crypto tax loss in Australia 1 July 2021 – 30 June 2022.
Crypto harvest tax loss with Koinly
A user needs to create a free account and sync all available crypto wallets and exchanges used. Koinly then determines short- and long-term capital gains, capital losses, cryptocurrency revenues and other expenses. The user can view all this information on the tax report page in the summary, which provides a comprehensive presentation of the tax invoice for the fiscal year.
Koinly also allows users to track their unrealized profits and losses from the dashboard. Users will be able to monitor the performance of each of their crypto assets and identify potential possibilities for tax loss harvests.
Koinly sets up the cost-based method based on the user’s location. For example, the common cost method for UK users or the average cost basis for Canadian users. For countries with various cost-based methods, such as the USA and Australia, Koinly uses FIFO by default. However, customers can also choose which cost-based approach they want to implement in the settings.
Finally, users need to go to the tax report page and select the tax report they want to download. Koinly offers specific tax reports based on the user’s location. For example, IRS Schedule D and Form 8949 for US taxpayers or HMRC Summary of Capital Gains for UK taxpayers.
Koinly offers an effortless solution to track crypto investments and simplify tax reporting. With features like portfolio tracking, easy data transfer, error reconciliation, and reliable crypto tax reports, the platform is a great crypto taxation tool for those looking for a simple way to manage their taxes.
Readers can get 20% off any Koinly subscription using the following. promo code AMB20.
For more information about the platform, visit official website.
Disclaimer: This is a paid post and should not be considered news/advice.