Koinly for Crypto Tax Calculations
With the recent boom in crypto trading and the advent of cryptocurrencies as a means of investment, it's becoming increasingly important for anyone involved in crypto trading to keep tabs on their tax obligations. As a trader, you need to understand all the different ways you'll need to pay taxes on crypto. Let's see how Koinly helps in the tax calculation of crypto assets.
What is Koinly?
Koinly is a powerful platform that makes tax planning for cryptocurrency investors simple and accessible. It was launched by Robin Singh in 2018 as a revolutionary crypto tax solution that offers automated capital gains reporting for both investors and accountants.
It is the fastest-growing crypto tax solution, with offices in more than 20 countries. It integrates with more than 6,000 blockchains, 350 exchanges, and 50 wallets, providing a comprehensive crypto tax reporting service. Crypto Portfolio Tracking with Koinly is free, but to get the full suite of tax reports, you must become a premium member.
Benefits of using Koinly
Crypto tax calculations should be done regularly. Failure to pay taxes can cause serious consequences. You may have to pay fines and interest on your taxes. A good way to handle the problem is to find the right accounting software for cryptocurrency. With Koinly, you don't have to worry about anything because it does everything for you.
Koinly has a dedicated accountant solution to help you work faster and smarter. It will help you to calculate your clients' crypto taxes in a reliable and fastest way. You'll be able to generate HMRC-compliant reports in minutes.
You can integrate Koinly with crypto exchanges and wallets through using API or by uploading your transaction history as a CSV file. This helps you to keep track of your crypto transactions from one platform.
Koinly makes it easy to transfer your funds to your own wallets. It automatically imports all of your transactions with the current market prices, matches your transfers between your own wallets, and shows your profits and losses. It lets you generate a tax report and import your tax forms in under 20 minutes.
It helps to automatically match transfers between your own wallets, as Koinly uses a combination of time-based heuristics and general matching techniques.
What is crypto cost basis
The cost basis of a cryptocurrency is the original purchase price at which it was acquired. In the case of the other types of cryptocurrencies, their cost basis is the amount paid for the coins when they were first issued. For example, if you buy Bitcoin in 2016 for $20,000, the cost basis is $20,000.
The purpose of a cost-basis method is to understand which cost base you should use when calculating your capital gains and losses. Different countries have different rules on cost-basis methods.
While countries like the UK and others have stringent rules regarding cost-basis methods, the US and similar countries allow you to choose any cost-basis methods that work for you.
Cost basis formulas are a wide range of choices. Some of them include:
• First In, First Out (FIFO): Under this method, the first crypto you buy is the first one you sell. And the cost basis of crypto assets is based on this first crypto.
• Last In, First Out (LIFO): This method depends on the cost basis of the crypto asset you purchased most recently.
• Average Cost Basis (ACB): The average cost basis is the total amount you paid for your asset(s) divided by the total number of tokens/coins you own.
• Highest Cost, First Out (HIFO): In this case, the cost basis is the most expensive asset sold first.
• Lowest Cost, First Out (LCFO): It's totally the opposite of Here the least expensive asset sold first is considered.
From the above list, the FIFO methodology is the most commonly accepted calculation method. While most countries support and recommend using the FIFO method, the weighted average cost method is being accepted by some others as the crypto cost basis method.
However, FIFO is considered the most beneficial cost-basis method for tax purposes as it helps minimize capital gains.
Koinly UK: Computing crypto taxes in the UK
In the UK, the crypto tax rules used to change constantly. By using Koinly, you don't have to worry about tax calculation. Koinly keeps a close watch on the HMRC's Crypto Assets Manual. It also regularly updates the guide to keep us informed and tax compliant.
For crypto income in excess of the £12,300 tax-free allowance, you'll have to pay either 10% or 20% tax on capital gains. Again, you'll be taxed between 20% and 45% on any additional income from cryptocurrency over the personal allowance. The exact tax amount you'll pay depends on the total crypto transaction you've made and the Income Tax band that applies to you.
Author: Vighnesh M V
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