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How to Calculate Capital Gains from Cryptocurrency Trading

Calculating capital gains from cryptocurrency trading involves a few essential steps. First, you need to determine the acquisition cost of the cryptocurrency, which includes the purchase price and any associated fees. Then, whenever you sell or exchange your cryptocurrencies, track the selling price and any transaction fees incurred during the sale.

Step 1: Determine Acquisition Cost

Your acquisition cost is the total amount you spent to acquire your cryptocurrency. For example, if you bought 1 Bitcoin for $10,000 and paid $100 in transaction fees, your acquisition cost is $10,100.

Step 2: Determine Selling Price

When selling, record the price at which you sold your cryptocurrency. If you sold that same Bitcoin for $15,000 and incurred a $50 transaction fee, your selling price is $14,950.

Step 3: Calculate Capital Gains

To calculate capital gains, subtract the acquisition cost from the selling price. Using our example:

Capital Gain = Selling Price - Acquisition Cost
Capital Gain = $14,950 - $10,100 = $4,850

Important Considerations

Keep in mind that different countries have varying regulations regarding capital gains tax. Be sure to understand the specific tax implications in your jurisdiction. Additionally, consider holding periods, as long-term capital gains may be taxed at a lower rate than short-term gains.

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