Cryptocurrency Cost Basis Explained for Beginners (in Less Than 3 Minutes) | CoinLedger

[@artbyash-ashleypower4122]

What if you DCA, and have many different entry costs?

[@coinledger]

Same logic applies. You will have different tax lots for each purchase tranche. More info here: coinledger.io/blog/crypto-cost-basis

[@cryptosurfer1425]

How does this work when filing joint and you have separate accounts?

[@Frieza.exe.z]

Incredible work here!

[@johnwilliamson3164]

WHERE does one go to enter the cost basis once it is known? Thanks

[@Raven1-2388]

(disclaimer: I'm not an accountant or tax advisor. this is for info purposes only from a complete degen. don't get wrecked based on what I say) You only report cost basis when you sell. For the irs, it would be reported on Schedule D and Form 8949. Places like Robinhood and other exchanges, will provide you will a nice breakdown form of your cost basis. You would attach this as well. If you start sending coins off exchanges, then it gets messier, but there are tools only that can help you figure it out and also probably provide you with a nice breakdown of your cost basis. But if it's confusing, you may want to work with a tax professional that's familiar with crypto. But I hope this helps.

[@JoelIsaacMills]

so, what if i bought 1 eth for 1000, then later bought another for 2000, would that make my cost basis 1500?

[@Raven1-2388]

(disclaimer: I'm not an accountant or tax advisor. this is for info purposes only from a complete degen. don't get wrecked based on what I say)... those would be treated separately, not averaged. you can use two methods for calculated your cost basis. you can either sell the exact unit you bought. or you can use the first in, first out (FIFO) method. Let's go over an example (from my understanding): you buy 1 eth for 1000, you later buy 0.5 eth for 2000 (eth @ 4000/coin). Then after those two purchases, you sell 0.5 for 3000 (eth @ 6000/coin). What's your cost basis? If you use the "exact" unit method you may decide to sell the 0.5 eth you recently purchased for 2000, making 2000 your cost basis. 3000 - 2000 = 1000 capital gain. (think of it as... you bought multiple chairs that are all the same, each at different times... well, they technically all have the same market value. But you decide to pick out a specific chair when you sell it, and use the cost you paid for that specific chair as your cost basis). An advantage to the above method is it could potentially lead to a lower capital gain. However, depending on when you purchased the original eth (whether the first purchase or the second purchase), some of your cost basis could be in "long-term" capital gain territory (purchase 12+ months earlier) or short-term capital gain territory (purchased < 12 mo before). Short-term and long-term capital gains are taxed differently, and vary depending on your tax bracket. But generally, taxes on long-term capital gains are less. Capital losses should also be a consideration, although you can only take a make capital loss of $3000 per tax year. Let's do another example: you buy 1 eth for 1000, you later buy 0.5 eth for 2000 (eth @ 4000/coin). Then after those two purchases, you sell 0.5 for 3000 (eth @ 6000/coin). This time you decide to use the first in, first out method (FIFO). That means, the first coin you purchased (that 1 eth for 1000) would be your cost basis. 0.5 * 1000/coin = 500 cost basis. 3000 sale - 500 cost = 2500 capital gain. See Q39 and Q41 on the irs website link here to read what the irs says about using the "unit" method and the FIFO method to calcualte cost basis -- www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions Again, I am a DEGEN not a tax advisor. If a professional has a critique of what I said above, please chime in.

[@coinledger]

No - you would have two different tranches of basis. 1 with basis of 1000, 1 with basis of 2000. More info here: coinledger.io/blog/crypto-cost-basis

[@Aura_m93]

What if I’m buying usdc a lot last year but never sold, will I still have to repeat the cost basis?

[@Raven1-2388]

(disclaimer: I'm not an accountant or tax advisor. this is for info purposes only from a complete degen. don't get wrecked based on what I say) by "repeat," do you mean "report"? You only have to report your cost basis to the irs when you sell. if you traded another crypto for the usdc, a tax event happened for that other crypto. if you purchased usdc from an exchange, using us dollars, then most likely when you sell your usdc, you will incur a capital loss, because you probably pay $1 + fees for one usdc, meaning your cost should be higher than your sale price. If you stake usdc and earn interest, that would be considered income (just like how earning interest in a bank is income). Hope this helps :)

[@wayne3223]

Is it first in first out, last in first out, or what?

[@shawnsnow6413]

Right. I'm trying to figure out if I can just use average cost basis, because otherwise it's going to be a nightmare.

[@ninjetti]

@@shawnsnow6413 different exchanges use different methods... Coinbase uses a 'Largest in, first out"... Robinhood uses a "first in first out".

[@WylandProductions]

What if an exchange like Gemini gives me cost basis on a 1099? Should I use that to file even if I had made transfers?

[@EverymanJWL]

Does the cost basis they gave you make sense for the average coin price you have within that exchange + including the cost basis of said coin you transferred from another exchange? If so then yes. If you can't verify it. Don't trust it. Lots of inconsistencies and straight f#@%ery going on with these exchanges and tax programs. It's bad for business.

[@KeeperOfKale222]

So lets say I buy $1000 of ALT in 2018. I get an airdrop of ALT2 for holding 1 year later. Let's say I buy $970 of ETH using ALT2 on Jan 1 2022, and I sell my ETH that same day to USD. What's my cost basis? Is it $970 since I've held the asset for more than one year? Is it $0 since the airdrop was free? Is it the gas fee of claiming?

[@ronaldgonzalez5073]

Thank you

[@debbymiller8828]

this is just a sales pitch.

[@ashleymarie6682]

Thanks for saving me time

[@bxanyon]

This does not cover deposits and how to handle them, cryptotrader.tax flags deposits when you import exchange trading info. U have to somehow classify each deposit, he only covers classifying as income for goods & services. Deposit is not g&s, so, how do you create cvs file to add cost basis?!?🤦🏽‍♂️