Taking care of Kraken taxes can be easy when you know what taxable events are in play when using this exchange.
Kraken is one of the original and most popular crypto exchanges, offering crypto trading, futures, margin trading, solutions for institutions, crypto staking, and more.
This week, we explore all the taxes (US) involved when trading crypto for FIAT or crypto for crypto and gaining crypto staking rewards on Kraken.
Do I pay taxes for crypto trades on Kraken?
You pay taxes when you trade crypto for FIAT or crypto for other cryptos on Kraken if you’re in the US.
In the US, according to the IRS, every crypto-to-FIAT or crypto-to-crypto trade is a taxable event, subject to capital gains taxes.
On Kraken, you can trade FIAT for many cryptocurrencies, leading to a capital gains tax scenario in the US. You must determine the cost basis of the crypto you’re selling, meaning the price you paid when you bought the crypto you are now selling. The sales proceeds are the total amount you’re selling (in USD). The capital gain/loss is the difference between the sales proceeds and your cost basis.
Learn all the tax implications of trading crypto in the US.
Do I pay taxes for margin trading or Futures trading on Kraken?
Yes. Trading crypto with margin or through futures results in the same tax obligations as for crypto spot trading. In these cases, your gain or loss could be higher due to the use of leverage, leading to higher capital gains or losses, but the tax consequence is the same as for regular trades.
As a result, every crypto-to-crypto, crypto-to-FIAT margin, or futures trade is a taxable event in the US, subject to capital gains taxes.
Are Kraken fees tax-deductible?
According to US taxation rules, they can be tax-deductible if fees are trading-related.
When you sell your crypto, you can deduct the trading fee, lowering your total sales proceeds and, consequently, your capital gains in that trade.
However, fees resulting from transferring your crypto between wallets or exchanges cannot be used to offset sales proceeds. Learn more about the taxes involved when you transfer crypto between wallets.
Do I pay taxes when receiving staking rewards from Kraken?
In the US, you’re subject to ordinary income taxes if you gain crypto staking rewards from Kraken.
When you receive crypto staking rewards, you must determine the Fair Market Value (in USD) at the time of your receipt and declare it as ordinary income in your income tax return.
If you receive crypto staking rewards multiple times during the tax year, you must determine the FMV (in USD) each time you receive them. When you file your tax return, you need to report the sum of all the staking rewards you received as ordinary income.
Learn more about the tax implications of receiving crypto staking rewards in the US.
Does Kraken report to tax authorities?
Kraken, same as other exchanges which operate in the US, is obligated to obey the regulatory and legislative requirements concerning crypto tax reporting.
Under the Infrastructure Investment and Jobs Act of 2021 (IIJA), starting on January 1, 2023, a “broker,” such as crypto exchanges, will be required to report transactions involving “digital assets” for the calendar year to the IRS on Forms 1099-B or another similar tax form.
How to report Kraken taxes?
If you trade on Kraken, you have to determine the gain/loss on each trade you conducted (crypto-to-FIAT or crypto-to-crypto trade) and report it on Form 8949 and Schedule D of your Form 1040.
If you receive crypto staking rewards, you must determine the FMV in USD when you receive them and report it on your income tax return as ordinary income.
Learn all about reporting your crypto taxes.
There are several ways to export your transactions from Kraken and import them into CoinTracking. Watch this video to learn the steps using an API:
The best Kraken tax calculator: CoinTracking
The best crypto tax software to import and track your Kraken trades 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 Kraken, 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.
Do I need to pay taxes on Kraken?
Yes. In the US, you can be liable for the following taxes when using Kraken:
Trading crypto for other cryptocurrencies (e.g., BTC): Capital gains taxes
Trading crypto for FIAT: Capital gains taxes
Margin crypto trading: Capital gains taxes
Futures crypto trading: Capital gains taxes
Receiving crypto staking rewards from Kraken: Ordinary Income taxes
Kraken 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.