Keep Track of Staking Rewards, Cost Base, and Hardware Wallet as a Tax Deductible Item?

Aerith-Waifu on 05/09/2021 - 12:39
Last edited 05/09/2021 - 12:39

Hi, is hardware wallet tax deductible since we do pay tax on our crypto now?

Also, how do you guys keep records of staking rewards as some are paid daily and others are paid every 5 days?

Then there is the question of cost base once the staking rewards are included as income?

Say John has 500 ada and he gets 1 ada every 5 days, that 1 ada is worth $3, so he adds the $3 to his taxable income. Then that 1 ada has a cost base of $3. One year later John decided to sell his now 865 ada (500 original purchase and 365 staking purchase), since each staking day ADA will have a different value, that means John will have 365 days of different cost base when he comes to sell? <—————- if thats true then good luck work out the capital gains tax on that 865 ada sale…………….

Financial

Comments

  • justdigi on 05/09/2021 - 12:53
    +2

    That’s exactly how it works for shares and DRP, what makes you think it would be any different for Crypto?

    • Innately Incognito on 05/09/2021 - 13:16
      +1

      Aren't share DRPs given at a much lower frequency though, maybe twice a year? And consistent in value?

      Just using the example of ADA above it would be a nightmare to calculate (automated tools will exist) because ADA staking rewards are every 5 days and a variable amount received each 5 days that averages out to around 5-6%

      So two people with the same investment will potentially never receive the same amount every five days, if they're in different staking pools.

      In any case tools will calculate the tax for you.

    • Aerith-Waifu on 05/09/2021 - 22:22

      DRP is twice a year, this is 365 days or 35 days, my post is to let people know while staking and rewards are great, if not careful its going to be nightmare when it comes to selling and capital gains.

  • boxosaurus on 05/09/2021 - 13:22

    Hi, is hardware wallet tax deductible since we do pay tax on our crypto now?
    —> yes

    Also, how do you guys keep records of staking rewards as some are paid daily and others are paid every 5 days?
    —> koinly.io

  • rektrading on 05/09/2021 - 13:56
    +1

    Money out - money in = gain/loss.

    Keep it simple and keep on staking.

    Btw ADA looks good for $10 by 2022.

  • enzioFirenze on 05/09/2021 - 13:57
    +1

    what if you are farming in a defi ecosystem? that's even harder to track.

  • happychild100 on 05/09/2021 - 16:49

    First you say 1 ada every 5 days, then somehow that turns into 1 ada per day?

    • Aerith-Waifu on 05/09/2021 - 22:25

      some coins are paid daily, ada is just an exsample

  • avoidfullprice on 05/09/2021 - 17:17

    .. how do you guys keep records…

    Give your accountant access to your crypto walllet transactions.

    … if thats true then good luck work out …

    What an accountant can help you with.

    • rektrading on 05/09/2021 - 17:34

      That is a bad suggestion.

      Never give people access to the wallet nor disclose the wallet address or the Tx history to family and friends. Personal safety is the most important thing about owning digital assets and the only way to do that is to keep those details hidden from family or friends.

      • avoidfullprice on 05/09/2021 - 23:53

        Never give people access to the wallet nor disclose the wallet address

        Didn't suggest that

    • Aerith-Waifu on 05/09/2021 - 22:24

      Trust me if you are going to give these information and let your accountant do it, its going to cost you an arm and a leg unless you are making heaps out of it. As most accountant charges around $180 an hour imagine the accountant bill when he needs to work out the capital gains tax on 1 year worth of staking and transactions…….

      • avoidfullprice on 05/09/2021 - 23:49

        Whatever record you need to keep for ATO, that's the record you would give to an accountant if you don't want to deal with the nightmares. I merely suggest a way other then having food luck working out yourself.

        By you of course I meant John ;)

        • Aerith-Waifu on 06/09/2021 - 21:48

          Oh yeah, plenty people will get a nasty shock if they dont do it right. I for one does not staking at all simply its not really worth it. But I can certainly see the upside for people who have invested really early and then the coin booms

  • bemybubble on 06/09/2021 - 11:20

    Hi, is hardware wallet tax deductible since we do pay tax on our crypto now?

    Tax deductible in the sense it will form part of the cost base of the crypto you sell. Won't be able to claim a straight out deduction for it as it's capital in nature…

  • FirstWizard on 13/09/2021 - 15:35

    I recently signed up for tax.crypto.com
    I can sync a handful of exchanges and import as CSV from wallets. it does the cost base calculations for bonuses/rewards/trades etc.

    Needed a bit of work to add the CSV from BTCmarkets as the format was different. But they had a guide on how to change formats

    • Aerith-Waifu on 17/09/2021 - 01:44

      Sounds pretty good:) Thanks for sharing

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