calculating-crypto-taxes

# Calculating Crypto Taxes ## Overview Calculate cryptocurrency tax obligations from transaction history. Supports multiple cost basis methods (FIFO, LIFO, HIFO), identifies taxable events (trades, staking, airdrops), and generates Form 8949 compatible reports. **DISCLAIMER**: This tool provides informational calculations only, not tax advice. Consult a qualified tax professional for your specific situation. ## Prerequisites Before using this skill, ensure you have: - Transaction history exported as CSV from your exchanges (Coinbase, Binance, Kraken, etc.) - Python 3.8+ installed - Understanding of your tax jurisdiction's crypto rules ## Instructions ### Step 1: Prepare Transaction Data Export your transaction history from each exchange as CSV. Supported formats: | Exchange | Export Location | |----------|-----------------| | Coinbase | Reports → Tax documents → Transaction history CSV | | Binance | Orders → Trade History → Export | | Kraken | History → Export | | Generic | See `{baseDir}/references/exchange_formats.md` for column mapping | ### Step 2: Run Basic Tax Calculation Execute the tax calculator with your transaction file: ```bash python {baseDir}/scripts/tax_calculator.py --transactions your_trades.csv --year 2025 ``` This uses FIFO (IRS default) and outputs: - Total capital gains/losses - Short-term vs long-term breakdown - Summary of taxable events ### Step 3: Choose Cost Basis Method Compare different methods to understand tax implications: ```bash python {baseDir}/scripts/tax_calculator.py --transactions trades.csv --compare-methods ``` Or specify a method: | Method | Flag | Description | |--------|------|-------------| | FIFO | `--method fifo` | First In First Out (IRS default) | | LIFO | `--method lifo` | Last In First Out | | HIFO | `--method hifo` | Highest In First Out (minimize gains) | ### Step 4: Generate Tax Report Create Form 8949 compatible CSV: ```bash python {baseDir}/scripts/tax_calculator.py --transactions trades.csv --method fifo --year 2025 --output form_8949.csv --format csv ``` Output includes: - Description of property - Date acquired - Date sold - Proceeds - Cost basis - Gain or loss ### Step 5: Handle Income Events (Optional) For staking, airdrops, or mining income: ```bash python {baseDir}/scripts/tax_calculator.py --transactions all_events.csv --income-report ``` This identifies: - Staking rewards (valued at receipt) - Airdrops (valued at receipt) - Mining income - DeFi yield ### Step 6: Multi-Exchange Consolidation Combine multiple exchange exports: ```bash python {baseDir}/scripts/tax_calculator.py --transactions coinbase.csv binance.csv kraken.csv --year 2025 ``` The tool: - Merges all transactions - Sorts by date - Calculates unified cost basis - Handles transfers between exchanges ## Output ### Tax Report (Form 8949) ``` ============================================================ CRYPTO TAX REPORT - 2025 ============================================================ SHORT-TERM CAPITAL GAINS/LOSSES (< 1 year) ------------------------------------------------------------ Description Acquired Sold Proceeds Cost Gain/Loss 0.5 BTC 03/15/25 06/20/25 $52,500 $47,500 $5,000 2.0 ETH 04/01/25 08/15/25 $7,200 $6,400 $800 ------------------------------------------------------------ Short-term Total: $5,800 LONG-TERM CAPITAL GAINS/LOSSES (>= 1 year) ------------------------------------------------------------ Description Acquired Sold Proceeds Cost Gain/Loss 1.0 BTC 01/10/24 02/15/25 $95,000 $42,000 $53,000 ------------------------------------------------------------ Long-term Total: $53,000 ============================================================ SUMMARY ------------------------------------------------------------ Total Proceeds: $154,700 Total Cost Basis: $95,900 Net Capital Gain: $58,800 Short-term Gains: $5,800 Long-term Gains: $53,000 ============================================================ ``` ### Income Report ``` CRYPTO INCOME - 2025 ------------------------------------------------------------ Type Date Asset Quantity FMV (USD) Staking 01/15/25 ETH 0.05 $160.00 Staking 02/15/25 ETH 0.05 $175.00 Airdrop 03/01/25 ARB 100 $150.00 ------------------------------------------------------------ Total Income: $485.00 ``` ## Error Handling See `{baseDir}/references/errors.md` for comprehensive error handling. Common issues: - **Missing columns**: Verify CSV format matches exchange template - **Unknown transaction type**: Review and manually categorize - **Insufficient lots**: Check for missing buy transactions ## Examples See `{baseDir}/references/examples.md` for detailed usage examples. ### Quick Examples **Basic tax calculation**: ```bash python tax_calculator.py --transactions trades.csv --year 2025 ``` **HIFO to minimize gains**: ```bash python tax_calculator.py --transactions trades.csv --method hifo --year 2025 ``` **JSON output for processing**: ```bash python tax_calculator.py --transactions trades.csv --format json --output tax_data.json ``` **Verbose with lot details**: ```bash python tax_calculator.py --transactions trades.csv --verbose --show-lots ``` ## Configuration Settings in `{baseDir}/config/settings.yaml`: - **Default method**: Cost basis method (fifo, lifo, hifo) - **Tax year start**: January 1 (US) or fiscal year - **Exchange formats**: Column mappings for CSV parsing - **Holding period**: Days for long-term (default: 365) ## Resources - IRS Virtual Currency Guidance: https://www.irs.gov/businesses/small-businesses-self-employed/virtual-currencies - Form 8949 Instructions: https://www.irs.gov/instructions/i8949 - CoinGecko API for historical prices