Your Coinbase taxes guide is here. Traded on Coinbase and wondering about taxes? We got you.
Coinbase is a leading crypto exchange serving customers worldwide. They were the first crypto exchange to do an IPO and one of the pioneers in the crypto industry.
If you’re in the US, you’ve certainly heard of Coinbase as an easy and intuitive way to buy your first crypto and store it. Coinbase offers more investment vehicles for investors and corporations, including crypto interest, receiving cash loans with bitcoin as collateral, and more.
Let’s cover all the tax implications of using Coinbase and its products as a US resident.
In this article:
Do you pay taxes trading crypto on Coinbase?
Yes. If you’re in the US and sell your crypto on Coinbase, you’ll have a taxable event, subject to capital gains taxes.
Trading any cryptocurrency for FIAT (e.g., USD) or another cryptocurrency (including stablecoins) is a taxable event in the US. If you do any of those operations while using Coinbase, you’ll have to determine the capital gain/loss on each trade and report it on your tax return.
Your capital gains can be long-term or short-term, depending on your holding period. If you hold your crypto for no more than 12 months before selling it, you’ll be subject to a short-term capital gains tax rate, ranging from 10% to 37%.
If you hold that same crypto for more than 12 months, you’ll be subject to a long-term capital gains tax rate, ranging from 0% to 20%.
Is buying crypto on Coinbase a taxable event?
It depends. Simply buying any cryptocurrency with FIAT is not a taxable event in the US. You can buy crypto with USD and store it on Coinbase with no extra crypto tax reporting needs if you never sell. However, if you buy crypto with another crypto (including stablecoins), you will need to recognize a taxable event and be subject to capital gain taxes.
Is transferring crypto from Coinbase to another wallet taxable?
No. Transferring crypto from one place to another is not a taxable event. It’s just like transferring cash from one bank account to another.
Let’s imagine that you bought $1,000 worth of Bitcoin on Coinbase, and now you want to transfer it to Binance or your crypto wallet. Such a transfer is not considered a tax event, and you don’t need to report it on your tax return.
Find out if you can deduct the transferring costs from this guide.
Do I have to pay taxes for earning rewards from Coinbase Earn?
On Coinbase, you can receive small crypto rewards for learning about some cryptocurrencies and completing a quiz after the learning. Such a reward is considered ordinary taxable income. Even though the rewards might be small, if you earned it by doing something (e.g., filling out questionnaires), it is considered earning an income. You have to recognize the FMV of those crypto rewards upon receipt and report it on your tax return as ordinary income.
Do you have to pay taxes for staking on Coinbase?
Yes. You have to report ordinary income for all the staking rewards you receive on Coinbase.
On Coinbase, you can stake Ethereum 2.0, Tezos, Cosmos, and others, earning between 0.15% (USDC) and 5% APR (Cosmos). If you start staking and receive crypto rewards from it, you’ll have to determine the Fair Market Value (in USD) at the time when you receive them. Then, you have to report the amount as ordinary income. Each time you receive a new batch of staking rewards, you will need to determine their FMV and later report the amount on your income tax return.
Learn more about the tax implications of staking crypto.
Do you pay taxes when using a Coinbase card?
Yes. Paying for any goods/services with crypto by using a crypto debit/credit card is a taxable event in the US. You’re considered first selling your crypto for FIAT, then using the FIAT immediately to pay for the product/service. The deemed sale of crypto is a taxable event, and the resulting gain/loss will need to be reported on your tax return. So the answer is yes, you need to pay taxes when using a Coinbase card.
Let’s look at this example:
Imagine you bought $1,000 worth of bitcoin in January 2021. In June 2021, your bitcoin was worth $1,100, meaning the BTC price had a 10% increase. You decide to buy a bag for $100 in June 2021.
Your $100 worth of bitcoin in June 2021 was $90.9 in January 2021, given the 10% increase in 6 months. When you sell your $100 worth of crypto now to buy the bag, you will have a gain of $9.1 from the bitcoin price appreciation of that portion of your bitcoin being sold. On top of your purchase, you’ll have a small tax bill based on the $9.1 gain. In this case, since you sold some of your bitcoin before holding it for 12 months, you’ll be subject to short-term capital gains tax rate, ranging from 10% to 37%.
Learn about the tax implications of purchasing goods/services with crypto.
Learn how to import your Coinbase trades into CoinTracking:
Do you have to pay taxes if getting a loan from Coinbase?
No. Receiving a cash loan while using your bitcoin as collateral is not a taxable event. You can take any crypto loan without the need for extra crypto tax reporting.
Check out other tax considerations about crypto loans, including deducting loan interest.
Does Coinbase report to the IRS?
Yes. Coinbase is required to comply with IRS crypto reporting requirements. The IRS and other government authorities can enforce Coinbase and other crypto exchanges serving US customers to disclose certain information about trades and personal data.
If you receive an IRS letter stating that you have taxes due from not reporting your crypto trades, you should probably seek help from a crypto tax specialist who can help you reconcile them and amend your tax return to reflect the correct result.
Do you have to pay taxes on Coinbase?
Yes. If you use Coinbase to trade, earn, or spend crypto, please be aware of the following taxable events:
Trading crypto for other cryptocurrencies: Capital gains taxes
Trading crypto for FIAT: Capital gains taxes
Trading crypto for stablecoins: Capital gains taxes
Receiving crypto earn rewards or staking rewards: Income taxes
Purchasing products/services with Coinbase Debit Card: Capital gains taxes
The best Coinbase tax software: CoinTracking
The best crypto tax software for Coinbase trades in the market is CoinTracking.
You can import your trades using CSV or API, track your gains/losses, and generate tax reports according to your preferred accounting method.
Beyond Coinbase, CoinTracking is your full crypto tax solution for:
DeFi and NFT support with our ETH+DEX importer.
25+ advanced reports, including which coins offer you a tax-free rate.
Automatic capital Gains, according to 12 accounting methods (e.g., FIFO, LIFO, HMRC, ACB), accepted worldwide.
Generating complete Tax Reports in your country.
Coinbase taxes with no errors: CoinTracking Full Service in the US.
CoinTracking also offers a Full Service for US traders. A crypto reconciliation tax expert from Polygon Advisory Group, a leading US crypto tax firm, will review your CoinTracking account, help fix any errors, and ensure you submit your crypto tax reports error-free.
Do you have any crypto tax questions? Check the best guides:
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This post is part of the Crypto Taxes AMA series. Follow our weekly AMAs on Twitter where our expert CPA, Sharon Yip answers your crypto tax questions. You can download 30+ AMA crypto tax reports for free.
Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.