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That means that when you sell or trade Bitcoin, you have to recognize capital gains or losses.Ĭapital gains are calculated by finding the difference between the price at which you sold the crypto asset and the price at which you bought it. IRS tax law considers Bitcoin and other cryptos an asset, comparable to stock, NOT a fiat currency (like the Euro, USD, or Yen). There are several steps and methods to calculating and using a cryptocurrency tax calculator or a crypto tax calculator. Just by entering a few basic details on the calculator, one can ascertain the short or long-term capital gains tax, depending on the holding period. A Bitcoin tax calculator is a tool that helps Bitcoin owners automate the calculator of short-term capital gains tax and the long-term capital gains tax on profit from bitcoins.

However, since crypto in itself is a rather novel concept, the calculation of its taxes still remains trouble for most and this is where a Bitcoin tax calculator (BTC) comes into the picture. If you are a citizen of the US and own any cryptocurrency including Bitcoin, you are automatically subjected to certain taxes per the law. While Bitcoin and other cryptocurrencies are an exciting opportunity for investors and technophiles alike, the legal ramifications of trading and owning cryptocurrency remain convoluted for most of us. It appeals to our sense of cultural evolution, our infatuation with new tech, and our ambitions for personal wealth. ‍Cryptocurrency is an exciting and cutting-edge asset class. For more information, make sure to read our 2021 Guide to Cryptocurrency & Bitcoin Taxes. Holding or transferring between wallets does not count. If you did not purchase any crypto in 2021, you can answer no to this question. As of December 31st, 2020, cryptocurrencies are considered “virtual currency” and must be disclosed as part of a 1040 filing.Īny US tax filers who purchased Bitcoin or other cryptocurrencies must now indicate their purchase on their 1040 filing when answering the question, “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?” Before we get to talking about our Bitcoin tax calculator and how it simplifies the crypto tax calculation process, for those new to the space, it must be noted that the IRS has officially issued revised instructions for 1040 forms.