If you’re a crypto investor, you may have realized that filing your Coinbase taxes can be a headache. The tax documents that Coinbase sends you may not always be helpful, making it challenging to accurately report your crypto gains and losses.
We’re here to give you all the information you need to file your taxes on Coinbase. But before we dive into the details, let’s start with the basics.
How Crypto Taxes Work in the US
In the US, there are two main methods of taxation when it comes to crypto taxes: capital gains tax and ordinary income.
To properly understand the effect your crypto transactions have on your tax liability, you have to understand capital gains tax and ordinary income taxation.
Ordinary income includes transactions unrelated to buying or selling cryptocurrencies.
This can include receiving:
- Rewards for staking or mining cryptocurrencies
- Coinbase referral bonus
- Coinbase airdrops
The fair market value of the coin you receive during the transaction determines the amount you report as ordinary income.
Coinbase crypto taxes can be complex, and there are often gray areas regarding how to classify certain transactions.
It’s always best to seek the advice of a knowledgeable crypto tax lawyer to ensure that you’re accurately reporting. Failing to do so can result in fines, penalties, and legal issues.
To better understand how to file Coinbase crypto taxes, check out our Crypto Tax Guide.
Calculating Coinbase Gains and Losses
Calculating your crypto gains and losses is relatively straightforward.
The cost basis is what you paid for an asset, while the proceeds are what you sold it for.
The difference between the two is your gain or loss.
If you bought Ethereum for $5,000 and sold it for $3,000, you would have realized a $2,000 loss.
There are two tax brackets for capital gains: short-term and long-term gains.
For example, if you purchase Bitcoin for $10,000 and then sell it for $12,000, you have realized a capital gain of $2,000, and you will need to pay taxes on that amount.
The amount of tax you owe will depend on your income tax bracket, how long you held the asset, and the type of gain.
Short-term gains are made on assets held for less than a year and are taxed at your regular income tax rate.
In contrast, long-term gains are made on assets held for more than a year and benefit from lower tax rates.
Understanding these tax rates can help you plan your crypto investment strategy to minimize tax liability.
What Does the Coinbase 1099-MISC Report?
The 1099-MISC from Coinbase includes any rewards or fees from Coinbase Earn, USDC Rewards, and/or staking that a Coinbase user earned in the previous tax year.
It does not include any income made from selling and trading crypto, nor will it cover other taxable transactions such as purchases of goods or services made with crypto.
Who Receives a Coinbase 1099-MISC?
According to the company website, you will receive this tax form from Coinbase if:
- You used Coinbase, Coinbase Pro, or Coinbase Prime
- And you earned $600 or more in rewards or fees from Coinbase Earn, USDC Rewards, or staking during the year
To determine the cost basis of your assets, you may need to provide additional information if you used multiple wallets or transferred coins from another exchange to Coinbase.
Coinbase may treat your assets as a zero-cost basis or count them as income if they lack the necessary information to determine their cost basis. This can result in an overinflation of your gains.
Avoid this by keeping detailed records of your cryptocurrency transactions, including the date and price of each transaction.
Coinbase Pro Taxes
Coinbase Pro is more tailored to professional traders with a more comprehensive range of assets to trade, including 130 cryptocurrencies.
Coinbase Pro can be challenging for new traders to understand. Still, it can be the ideal software for traders with more complex activity.
While crypto tax software can be reliable, we recommend speaking with a crypto tax attorney for help with more challenging trades.
What To Do With Coinbase Tax Documents?
While most people think crypto tax reporting is exclusively related to capital gains and losses, this isn’t true.
Coinbase tax documents report cryptocurrency that is taxed as regular income. Where this income is reported depends on your employment status.
Self-Employed (Business Owners, Freelancers, and Independent Contractors): If you are self-employed and your crypto activities are part of a trade or business, the information on the Coinbase 1099-MISC will be reported on Schedule C.
Not Self-Employed: For individuals who are not self-employed and file Form 1040, the Coinbase 1099-MISC information will be reported as “Other income” on Schedule 1, Line 8 of their annual tax return.
If you had any additional cryptocurrency activity—for example, if you traded crypto on Coinbase, bought anything with crypto, or traded on any other exchanges—then the Coinbase 1099-MISC will unfortunately not include everything you need for a full crypto tax report.
Which Coinbase Transactions Are Taxable?
Any Coinbase transactions resulting in income or capital gains are considered taxable.
This includes buying and selling crypto, receiving cryptocurrency as payment for services, and exchanging one type of crypto for another.
On the other hand, Coinbase transactions that don’t result in a gain or loss are not taxable. This includes transferring cryptocurrency from one Coinbase wallet to another.
How To Find Coinbase Tax Forms?
To find your 1099-MISC on Coinbase, log into your account and open the menu. Go to “taxes” and then “tax forms.”
You should be able to download your 1099-MISC from there and use it to file your taxes.
Consulting with a tax lawyer is a good idea if you have any questions or concerns about your tax liability.
What If I Don’t Get a 1099 From Coinbase?
If you don’t receive tax documents from Coinbase, you’re not off the hook for reporting cryptocurrency on your tax return. Any earned income or capital gains should be accurately reported to the IRS.
You can access a history of your Coinbase tax information and use it to calculate your gains and losses.
We suggest seeking the advice of a crypto tax lawyer well-versed in crypto regulation to help avoid any potential IRS penalties.
We Can Help You File Your Coinbase Taxes!
Filing your Coinbase taxes may seem daunting, but it’s essential to accurately report your gains and losses.
We can work with you to develop a customized tax strategy that minimizes your tax liability and maximizes your financial goals.