How does the cost basis affect my taxes when trading crypto?

1 answers

• Nov 29, 2021 · 3 years ago
  When it comes to taxes and crypto trading, the cost basis is a key factor that you need to consider. It represents the original value of the cryptocurrencies you're trading. Let's say you bought 1 Ethereum for $500. That $500 is your cost basis. When you sell or exchange that Ethereum, you'll need to calculate your capital gains or losses based on the difference between the cost basis and the sale price. If you sell it for a higher price, you'll have a capital gain and may owe taxes on that gain. If you sell it for a lower price, you may have a capital loss that can be used to offset other capital gains. So, the cost basis directly affects the amount of tax you'll owe or the deductions you can claim. It's important to keep track of your cost basis accurately to ensure you comply with tax regulations and optimize your tax situation.
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