If you've bought crypto, HODLed, and sold it later, your tax liability should be fairly easy to calculate. Let's look at a simplified, US-based example. Here's the formula:<ul><li>Fair market value - Cost basis = Capital gain / Loss</li><li>The fair market value is the current <a href="https://academy.binance.com/en/articles/what-is-a-spot-market-and-how-to-do-spot-trading">spot price</a> you'd find on an exchange. </li><li>Cost basis is the original price you paid for the asset plus any fees.</li></ul>Imagine you bought 2 BTC for $10,000 and sold them two years later for $30,000. You've now made $40,000 in capital gains: $60,000 (fair market value) - $20,000 (cost basis) = $40,000 (capital gains)

How do I calculate my taxes?

Generally speaking, taxable events include:<ol><li>Selling cryptocurrency for <a href="https://academy.binance.com/en/glossary/fiat">fiat</a></li><li>Trading cryptocurrency for another cryptocurrency (e.g., BTC for ETH).</li><li>Spending cryptocurrencies. In jurisdictions including the US, UK, Canada, and Australia, directly spending your crypto on goods or services can incur taxes if you made profits.</li><li>Receiving cryptocurrency as a result of a fork, airdrop or mining.</li></ol>

What are taxable and non-taxable events? 

Getting your taxes right is essential. <ul><li>That’s why it's recommended to get professional help calculating your tax bill if you have any doubts. This may be the case if you’ve been trading and not just investing. </li><li>The tax implications of regular trading are much more complicated. But most importantly, your situation for tax purposes is highly dependent on where you live. </li><li>Make sure to use all this information with that in mind.</li></ul>

Closing thoughts

In many countries, tax authorities require you to file your taxes regularly. This can be the case even if you owe zero taxes or need a refund. Failure to file can result in fees, penalties, interest, confiscated refunds, audits.

What happens if I don’t file my cryptocurrency taxes?

<ol><li>Buying cryptocurrency with fiat currency (except in cases where the purchase price is lower than the fair market value of the purchased coin).</li><li>Donating cryptocurrency.</li><li>Gifting cryptocurrency under a specific limit.</li><li>Transferring cryptocurrency from one wallet you own to another wallet you own.</li></ol>

The following are generally not considered taxable events:

A taxable event is a transaction or activity you're required to pay taxes on.<ul><li>A taxable event in one country might not be one in another. </li><li>Typically, transactions involving the sale of commodities, investments, and other capital assets are all taxable. </li><li>Selling or trading your crypto is likely to be taxed.</li></ul>A taxable event will leave you with capital gains (profit) or capital losses. <ul><li>If an asset you're holding appreciates and you trade it at a profit, you've made capital gains. </li><li>If you trade or sell that asset at a loss, you've incurred capital losses.</li></ul>

What’s a taxable event?

<ul><li>Tax authorities such as the IRS, ATO, CRA, HMRC, and others track cryptocurrency transactions and enforce tax compliance. </li><li>Large <a href="https://academy.binance.com/en/glossary/exchange">cryptocurrency exchanges</a></li><li>Governments use data analytics tools such as Chainanalysis to pinpoint cryptocurrency users. </li><li>The IRS and other tax authorities also partner and share data with other governmental bodies, academic institutions, and international governments to share information about cryptocurrency usage.</li></ul>

How do tax authorities know about my cryptocurrency?

In many countries, cryptocurrencies are subject to tax.<ul><li>Trading, spending or selling your crypto are often taxable events. </li><li>To calculate your taxes, you will need to consider your capital gains and losses. </li><li>You may also have to pay income taxes if you receive crypto as payment.</li><li>Every jurisdiction is different, so make sure you consult a tax advisor.</li></ul>

TL;DR

<ul><li>Your taxes will depend on your location, how long you've held your crypto, the type of activity you're doing, and other factors. </li><li>In general, you'll probably need to pay taxes or offset losses for selling but not when you buy.</li><li>As a fairly new asset, tax authorities are still developing crypto regulations. </li><li>It's your responsibility to keep track of your taxable gains and losses and pay the right amount of tax, according to your country’s regulatory framework.</li></ul>

Do I have to pay taxes when I buy or sell crypto?

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Trading crypto will likely trigger taxable events on capital gains or losses. Make sure to calculate your tax return carefully or consult a tax advisor.