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by sanbor 2632 days ago
Is there any rule of thumb to calculate taxes over crypto? Like "10% of your profits". I'm sure if you make more than 500k a year you might have to pay more taxes but I'm sure there is an average that covers 90% of traders.
4 comments

If you didn't keep proper records, then use the cost basis of your crypto as 0 and report the sale price as pure profit. You will never under pay your taxes that way, and if your numbers are low enough, it's probably worth it to overpay on taxes than to spend the time recovering detailed records of what happened in between.

If it's too big of a number for you, then better remake / recover those records. Luckily you have a permanent record called the blockchain.

If you need a rule of thumb, for example you want to have a rough idea what your taxes would be like to see if you're comfortable doing some liquidation or something, then sure. I'd back-of-the-napkin long-term gains at 20%, and short-term at 35% (covers both federal and state; assumes U.S.).*

Again, very rough. You need concrete numbers once you do actual trading, because in the U.S. you are required to make estimated tax payments. The actual numbers can, for example, vary wildly from nearly 0% to upwards of 50%.

* These are based on a typical 15% federal tax on long-term gains and 5% for state taxes; or 35% being a comfortable average for most people's effective tax rate in the U.S. for short term gains. The 50% tax rate is approached when you have largish gains, toward $1 mil or so, and live in expensive states like New York or California.

> 10% of your profits

Calculating your profits (and loses) is what these sites generally do -- that is usually the hard part, especially if you have a lot of transactions. Not to mention, the way that you calculate that differs by jurisdiction. Loses are just as important since they can have a significant benefit to the taxes you owe. I use bitcoin.tax and then export the data for my accountant to fit into the rest of my tax return.

*losses
In the US, profit on crypto is straight up capital gains. Held for less than a year = short term capital gains, taxed as regular income. Long term depends state-to-state, but overall taxed less than income (federal has 3 brackets - 0, 15, 20% depending on your income. 500k+ puts you in the 20% bracket)
Thanks you very much! I was looking into this just to have a guess.