Simplify cryptocurrency tax loss with Koinly

Users entering the crypto world often find it tiring to find out the taxes to be paid on their crypto income. Calculating and filing taxes can be quite complicated, especially if users have made transactions in several countries. Koinly eliminates all these complications by automatically consolidating the user’s trades in one place and helping them report their tax immediately.

Koinly is a game-changing tax software that streamlines and simplifies the tax filing of cryptocurrencies. The software automatically calculates users’ capital gains and produces a tax report when they link their cryptocurrency accounts.

Koinly supports more than 17,000 cryptocurrencies, over 350 exchanges and 50 wallets, which is more than most of its competitors. This means that users can connect all their accounts to Koinly and get a centralized overview of their cryptocurrencies and transactions.

Harvesting of crypto tax losses

Every time users sell, exchange, use or even give (depending on where they live) a cryptocurrency, the tax office sees this as disposing of a capital asset, and as a result, users will incur a capital loss or capital gain.

If users make a capital gain, they must pay capital gains tax on the profit from the disposal and do not have to pay tax on it if they make a capital loss. When users submit the tax as part of the annual tax return, they deduct the net capital loss from the net capital gain, and the amount remaining after that is the amount they are to pay the capital gains tax on.

Cryptocurrencies are collected when an investor sells cryptocurrencies at a loss to generate a capital loss that can be offset against capital gains and reduce their overall tax burden. Users can then buy the asset back at the reduced price to HODL it for later gains.

And by tracking the unrealized losses and realized gains, users can keep track of their taxable gains throughout the year and look for opportunities to create losses to balance them.

Sale of cryptocurrency

A cryptocurrency wash sale is when an investor sells a crypto asset at a loss to create a realized loss and then buys the same asset back immediately at the lower price before the market changes again, creating an artificial loss that can be used to reduce taxes. bill.

But tax offices around the world are sending a clear message that crypto investors need to pay taxes on their cryptocurrencies and have set very strict rules to try to stop investors from pursuing artificial losses.

Each country calls these rules differently, in Australia it is known as the laundry sales rule.

Australian sales rule for cryptocurrency

The Australian Tax Office (ATO) has a tax loss-making rule for fixed assets. The Australian Laundry Sale Rule applies when an investor sells an asset at a loss and buys the same asset with the intention of a tax advantage. Unlike many other tax offices, the ATO does not specify an exact period and instead states several factors that may constitute a laundry sale.

If users are considered to carry out a laundry sale, exchange rate losses as a result of these transactions cannot be claimed and set off against capital gains. The ATO has not specifically stated that these rules apply to crypto, but they are general rules for capital gains tax and crypto assets are subject to CGT rules.

The ATO issued a warning to taxpayers in June 2022, asking them not to participate in laundry sales, which indicated that it would be a priority for them this tax year. According to the ATO, taxpayers who participate in laundry sales risk facing rapid compliance measures and potentially extra taxes, interest and fines.

Assistant Commissioner Tim Loh said:

«Do not hang out to dry by participating in a laundry sale. We want you to count your losses, not have them removed by the ATO. “

Australia’s capital loss limit

IN Australia, users can use capital losses to offset capital gains. Although there is no limit, customers must use all of their capital losses each year before proceeding. As a result, if users still have a net capital gain for that financial year, they are not allowed to continue the capital losses.

Users can transfer capital losses indefinitely to future financial years if they have greater capital losses than they can utilize in a single financial year.

The harvest deadline for crypto tax losses in Australia is from July 1, 2021 to June 30, 2022.

Tax loss harvesting crypto with Koinly

A user must set up a free account and synchronize all existing crypto wallets and exchanges used. Koinly then determines short- and long-term capital gains, capital losses, cryptocurrency income and any other expenses. The user can see all this information on the tax report page in the summary, which provides a comprehensive representation of the tax bill for the financial year.

Koinly also lets users track their unrealized gains and losses in the dashboard. Users will be able to monitor the performance of each of their cryptocurrencies and discover potential opportunities for tax losses.

Koinly sets up the cost basis method based on the user’s location. For example, the method of merging shares for UK users or the average cost method for Canadian users. For countries where a number of cost-based methods are available, such as the United States and Australia, Koinly uses FIFO by default. However, customers can also choose in the settings which cost-based approach they want to use.

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 where the user is located. For example, IRS Schedule D and Form 8949 for US taxpayers or the HMRC Capital Gains Summary for UK taxpayers.

Last word

Koinly offers a simple solution for monitoring crypto investments and simplifying tax reporting. With features such as portfolio tracking, easy data import, error reconciliation and reliable crypto tax reports, the platform is a great crypto taxation tool for people looking for an easy way to handle taxes.

Readers can get a 20% discount on any Koinly subscription by using promo code AMB20.

To learn more about the platform, visit it official website.

Disclaimer: This is a paid post and should not be treated as news / advice.