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How To Manage Crypto Investments And Taxes

Investment decisions and Tax filings usually rank among the most stressful decisions for anyone. Luckily, the world today is evolving at the speed of light. While more complexity adds more and more headaches to our daily life, technological progress is keeping up the pace as well. What if you could manage crypto investments and taxes with no stress at the same time?

Automation makes life much more comfortable, especially when dealing with intricate topics such as investments and taxes. Endless days spent in front of a screen tracking the price are now over. Using automated bots, traders can now define sets of parameters and have the bots manage the funds 24/7. Improved efficiency combined with reduced stress is a perfect win-win situation. 

Unfortunately, a piece of the puzzle is still missing. Sooner or later, you will have to report your income to some tax authorities. If you are trading cryptocurrencies and have to manually go through hundreds of trades, chances are that you will almost regret earning a profit on your investments. But again, technology can now rescue you from these hurdles, making filing reports as easy as you could never have imagined.

Automated Investment

You may have heard of terms like Robo-advisory, Passive income, or Automated Trading. Nowadays, even hobbyist investors have access to powerful tools to manage their capital efficiently. Coinrule is a next-generation tool that allows you to manage your funds effectively 24/7 and have full control over the strategies with an intuitive interface. Thanks to Coinrule’s unique IFTTT logic, anyone can automate their trading strategies without any coding. Users can create rules with predefined parameters. A user-friendly smart-assistant will guide you step-by-step in implementing your investment strategy.

Automated Tax Filings

The days of crypto being labeled a scam and considered as “thin air” have long gone. The US government now views cryptocurrencies as property for tax purposes. Like assets such as stocks, bonds, and real estate, you incur capital gains and losses on your investments when you trade, sell or dispose of your crypto.

If you bought Bitcoin and then sold it for a profit, that will generate a capital gain from the sale. Depending on the tax bracket you fall under, you will pay a specific tax percentage on this capital gain. The tax rates fluctuate based on your tax bracket and whether the income was short term or long term. That’s a real pain for investors!

Automated Crypto Filings
Automated Crypto Filings

Other than buying, selling, and trading, if you earn crypto whether through a job, mining, staking, airdrop, or interest from lending activities-you are liable for income taxes on the US Dollar value of your crypto earnings. 

In the world of legacy finance, brokerage firms produce tax reporting for their clients. However, in the world of crypto, this becomes more difficult. Crypto exchanges are often far from being compliant with local regulations, especially in terms of taxes. On top of that, investors tend to move coins regularly between one exchange and another. In this way, the exchange has no way of identifying at what cost basis users originally bought the cryptocurrency. 

To accurately report your crypto taxes, you must aggregate all the data you have about your trades by pulling the transaction details from your exchanges and wallets. That makes the process of Crypto Tax reporting very tedious and time-consuming.

Luckily there are now also tools out there that can help you automate this aspect of your investments. For example, Cryptotrader.tax allows you to calculate your due taxes in a few easy steps, just by connecting your exchanges and wallets. The algorithm analyses the transaction history to provide you with your tax report in minutes.

Manage investments and taxes with no stress

It’s already a challenge to keep track of your manual trades, imagine filing a tax report with hundreds if not thousands of trades that your trading system executed. Using an automated trading system such as Coinrule can lead to a large number of trades that the automated trading strategy is generating. Coinrule also allows you to trade on different trading venues, increasing the complexity of the reporting. 

The solution to this dilemma is to use Coinrule and Cryptotrader.tax in tandem so that these tools will manage all the stages of your investment process.

Still keen to learn more about Tax in Crypto? Here’s your Ultimate Crypto Tax Guide where you will find everything you would ever want to know on this topic.