If you’re a Coinbase user, you may be wondering how to calculate your cost basis – the original value of an asset for tax purposes. The good news is that Coinbase makes it easy to track your cost basis, and even provides a handy tool to help you calculate it.
In this article, we’ll walk you through how to calculate your cost basis on Coinbase, so that you can be sure you’re correctly reporting your crypto gains and losses come tax time.
The first step is to log into your Coinbase account and navigate to the “Reports” tab. Here, you’ll see a list of all the transactions you’ve made on Coinbase. To calculate your cost basis, you’ll need to know the purchase price and date of each transaction.
If you don’t have this information handy, never fear – Coinbase will provide it for you. Simply click on any transaction in the list, and you’ll see all the relevant details including price and date.
Once you have this information for all of your transactions, you can use Coinbase’s cost basis calculator tool. To use the tool, simply enter in the relevant information for each transaction – purchase price, date, and whether it was a buy or sell.
The calculator will then determine your cost basis using either the first-in first-out (FIFO) method or the specific identification method (more on that below).
Once you’ve calculated your cost basis using the calculator tool, be sure to keep track of it going forward. Every time you make a new transaction on Coinbase, be sure to update your records so that you have an accurate cost basis for tax purposes.
There are two methods that can be used to calculate cost basis – the first-in first-out (FIFO) method and the specific identification method. The FIFO method simply means that the first asset purchased is considered the first asset sold when calculating gains or losses.
The specific identification method allows investors to specifically identify which assets were sold, in what order they were sold, and at what price. This allows investors to minimize their taxes by selling assets that have appreciated in value while holding onto assets that have lost value.
In most cases, the FIFO method will give investors the Lowest tax liability. However, if an investor has reason to believe that another method would result in a lower tax liability, they can elect to use the specific identification method by filing Form 8949 with their tax return.
When it comes time to file your taxes, Coinbase will provide you with a statement that includes all of the relevant information for each transaction made over the course of the year. This statement can be used as part of your tax return – simply include it with your other supporting documentation and report any gains or losses in accordance with IRS guidelines.
Calculating your cost basis on Coinbase is easy – simply log into your account and navigate to the “Reports” tab. From here, you can view all of your past transactions and get all of the relevant information needed to calculate your cost basis.
You can then use Coinbase’s cost basis calculator tool to determine your cost basis using either the FIFO method or the specific identification method. Be sure to keep track of your cost basis going forward so that you can accurately report any crypto gains or losses come tax time.