To get an accurate tax report, it is important to add all your wallets and transactions. A complete transaction history, it allows Crypto.com Tax to record the correct cost basis of your crypto and ensure the transfer transactions can be matched. 9 Ways to Cut Crypto Taxes Down to the Bone Schedule D is a tax form used to report capital gains and losses from the sale or exchange of assets, including stocks, bonds, mutual funds, and other securities. Taxpayers use this form to calculate their net capital gains or losses for the year, which are then reported on the individual’s personal income tax return. Regarding cryptocurrency, Schedule D is used to report capital gains and losses from the sale or exchange of cryptocurrencies, which are treated as capital assets for tax purposes. Taxpayers must report each transaction on Form 8949, and then summarize the information on Schedule D.
There are other ways to obtain virtual currency beyond simply buying it. For instance, you can earn cryptocurrency by mining it. You can also receive it as a promotion for goods or services, for free from cryptocurrency platforms, or for staking cryptocurrency. This latter activity allows you to earn interest by purchasing and setting aside your tokens to become an active validating node for a crypto network. In these situations, you owe tax on the entire value of the crypto on the day received and it counts as ordinary income. 4. Spending cryptocurrency Archit Gupta, CEO of Clear, a fintech company, says, "In the context of ITR-3, Schedule VDA offers two distinct options for reporting income. Users have the flexibility to choose between categorizing the income either as capital gains or as business income. It's crucial for taxpayers to exercise caution and note that regardless of their chosen reporting category, only the cost of acquisition is eligible for deduction from the sale price. This underscores the importance of careful consideration in reporting to ensure accurate and compliant financial disclosures."