How to Calculate Binance Taxes

calculate binance taxes

Two things in life are certain: death and taxes.

The first one is a bit beyond the scope of this website, but if you’re looking to maximize your returns and minimize your liabilities, we can help you calculate crypto taxes on Binance.

When am I liable to pay tax?

You are liable to pay tax on any transactions that are considered taxable events. The exact definitions vary by jurisdiction. To make things a bit easier, Koinly has a handy list of country-specific guides.

binance export

If you want guidance from the authorities themselves, the IRS has published an FAQ outlining their position on cryptocurrencies.

Generally, the following transactions are treated as taxable events:

selling

1. Selling your crypto for cash

Selling a cryptocurrency or digital asset for fiat currency is a taxable event. You are liable for capital gains tax on the amount (if any) that your original holding appreciated in value since you bought it. Capital losses may entitle you to a reduction in your tax bill.

goods and services

2. Buying goods and services with crypto

If you use Bitcoin to pay for any type of good or service, such as two pizzas, this will be counted as a taxable event and will incur a liability.

convert

3. Converting between cryptocurrencies

The rules here differ by country, but in the U.S. exchanging one crypto for another (e.g. BTC for ETH) is counted as a taxable event. You will be liable for any capital appreciation. This is calculated against the dollar value of crypto A, similar to when selling for fiat currency.

salary

4. Receiving crypto as income

If you are paid a wage or salary in Bitcoin or any other cryptocurrency (as many blockchain developers are), this will be counted as personal income and taxed accordingly.

5. Mining, staking crypto, or receiving an airdrop

Any cryptocurrency you receive from mining, staking, or an airdrop will generally be counted as personal income. If your mining is classified as a business operation, you will pay tax as a business. If it is a small-scale, personal endeavor then it will be added to your taxable income.

That’s a quick outline of the rules surrounding crypto and tax.

Which Tax Documents Does Binance Give You?

Binance does not do much of the hard work for you when it comes to calculating your crypto taxes. Whereas some U.S. based exchanges such as Coinbase and Gemini will fill out IRS forms for you, Binance only gives a list of all your trade history.

Binance gives you the option to export up to three months of trade history at once.

binance export


Note: If you traded on Binance's Margin or Futures platforms in addition to their spot exchange, you'll need to go through the export process for each of these too.

binance trade history

The exported document will look like this.

As Binance does not offer USD trading pairs, instead using Tether (USDT), you cannot immediately calculate the cost-basis for your purchases, i.e. the amount in USD that the cryptocurrency was worth at the time you bought it. This cost-basis figure is necessary for calculating any capital gains and/or losses.

Of course, as a stablecoin the price of Tether doesn’t fluctuate much, but it’s an extra step to keep in mind.

tether

How to Calculate Binance Cost Basis

Tax Returns

To accurately submit your tax filings, you need to know the cost-basis.

Cost-Basis

Cost basis is the original value of an asset for tax purposes, usually the purchase price, adjusted for stock splits, dividends, and return of capital distributions. This value is used to determine the capital gain, which is equal to the difference between the asset's cost basis and the current market value.
Source: Investopedia

You can do this manually, calculating the price of Tether in USD at the time of each buy and sell transaction, then assigning this value to the amount of cryptocurrency purchased or sold.

calculations

This is all a lot to keep in mind, and not something you want to mess up.

However, there is an alternative to going through potentially hundreds or thousands of transactions and calculating their cost-basis by hand.

As the number of people interested in crypto continues to increase, so does the number of software solutions to help you calculate the you tax owe. These programs automate the time-consuming task of referencing price history and calculating cost-basis, a process in which even the smallest error can have compounding effects.

  • TAX SOFTWARE
  • CryptoTrader.Tax
    • Easy import from nearly any crypto exchange
    • Can be uploaded to TurboTax
    • Support for many exchanges
  • Koinly
    • Very clean interface makes it easy to use
    • Supports over 300 exchanges
    • Can export US and Canadian tax forms
  • Accointing
    • Easily print tax reports at any time
    • Connect 4500 coins form all exchanges and wallets
    • Supports USA, UK, Austria, Germany, and Switzerland

How to choose which tax software is right for you

Starting Small

Picking out the best software for calculating your crypto taxes can seem almost as overwhelming as actually filing your taxes.

If you’re a casual trader who has only made a few transactions, you will be fine with the free version of a service such as Koinly.

Koinly's Home Page

If you have upwards of a hundred transactions across multiple exchanges, you should consider the paid versions of sites like cryptotrader or cointracker.io. These websites import your trades from multiple exchanges and present them in simple dashboards and exportable documents. Additionally, they do not have limits on the number of transactions you can import, unlike the free version.

CryptoTraders's Home Page

Many of these programs integrate with TurboTax, to make filing your return even easier. Check out our in-depth guide to adding cryptocurrency transactions to your TurboTax return.

sold or traded

If your taxes are even more complicated, for example you have mining income, staking profits, and multiple airdrops of various tokens, it would be wise to consult a crypto tax professional. A good accountant will ensure that you pay the right amount of tax and don’t have any troubles in the future.

Conclusion

Filing your cryptocurrency taxes correctly is not as difficult as it may first seem. With full logs of all your transactions stored by Binance, and tax software that will automatically crunch the numbers and calculate how much tax you owe, it’s never been easier to invest in crypto and keep everything above board. By following our guides on cryptocurrency tax and the different software options out there, you’ll save time, money, and many headaches down the line.