How should I answer "The Cryptocurrency Question" on Schedule 1?

Whether you agree or disagree with tax on crypto you need to answer this new question truthfully.

How should I keep track of my crypto trades?

One of the most important things to do in the crypto space is to keep records of all of your trades and activity. At Recap, we recommend always backing up your exchange transaction CSV files and keeping these backed up in multiple places. It is also important to keep this data safe and encrypted to ensure your own security.

What cost basis method should I use?

There are different approaches to cost basis; the most well known are FIFO, LIFO, SpecID, HIFO and LOFO. You should choose one method and use it consistently to calculate your capital gains.

Are trading fees tax deductible?

Incidental costs of purchase and disposal can be deducted from capital gains. There isn’t much guidance from the IRS yet but we would assume related costs such as Trading Fees are acceptable but transfer fees are not.

US Tax | Recap

US cryptocurrency tax solved

Declaring crypto just became higher priority than kids on the US Tax Return. Checking “Yes” to the crypto question can be heartbreaking but is no where near as painful as finding the numbers.

Here’s where Recap helps - import your trades and we do the math for you! We calculate your long term and short term capital gains and auto generate Forms 8949 and 1040 Schedule D.

The basics of crypto tax for US individuals

The lowdown on what’s taxable, how it should be treated, how and where to report and what rate of tax you can expect to pay.

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Fast crypto tax facts

Tax authority

IRS (Internal Revenue Service)

Current filing tax year

2020

Filing tax year dates

January 1, 2020 to December 31, 2020

Filing deadline

April 15, 2021

Applicable taxes

Capital Gains Tax, Income Tax & others

Capital Gains rates

0% - 20% long term, 10% - 37% short term

Declared by

Annual Tax Return

Useful links

IRS - FAQ on Virtual Currencies

What's actually taxable?

From selling to airdrops, here are the major crytpo activities that need to be considered for tax in the US.

Selling crypto for fiat

Trading crypto to crypto

Paying for goods & services with crypto

Mining crypto

Earning crypto

Rewards from staking, lending & referrals

Gifting or donating crypto

Airdrops

How Recap works

Import your data

Connect to the top exchanges, upload CSV files and import transactions manually.

Explore supported exchanges

Check your gains and losses

See all your crypto holdings and view all historic trades and transactions. Check your capital gains.

Download your tax report

Get your full tax report ready for your accountant.

View example 1040 report View example 8949 report

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Optimise your taxes
with your preferred tax method

FIFO: First In, First Out means that assets acquired first are disposed of first.
LIFO: Last In, First Out means that assets acquired last are disposed of first.
Highest Cost: Highest Cost means assets acquired with the highest value are disposed of first, which minimizes overall gains.
Lowest Cost: Lowest Cost means assets acquired with the lowest value are disposed of first, which maximizes overall gains.

What's the FMV?

FMV means Fair Market Value and in line with IRS guidance our FMV method finds the most recent price on the exchange where you traded.

Sounds standard?... You’d be surprised! It makes us one of the most accurate tax calculators on the block.

IRS - FAQ on Virtual Currencies (Q24, Q25)

Frequently asked questions

How should I answer "The Cryptocurrency Question" on Schedule 1?: Whether you agree or disagree with tax on crypto you need to answer this new question truthfully.
How should I keep track of my crypto trades?: One of the most important things to do in the crypto space is to keep records of all of your trades and activity. At Recap, we recommend always backing up your exchange transaction CSV files and keeping these backed up in multiple places. It is also important to keep this data safe and encrypted to ensure your own security.
What cost basis method should I use?: There are different approaches to cost basis; the most well known are FIFO, LIFO, SpecID, HIFO and LOFO. You should choose one method and use it consistently to calculate your capital gains.
Are trading fees tax deductible?: Incidental costs of purchase and disposal can be deducted from capital gains. There isn’t much guidance from the IRS yet but we would assume related costs such as Trading Fees are acceptable but transfer fees are not.

See more US tax questions

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