Question 1

What's the difference between short-term and long-term crypto gains?

Accepted Answer

Short-term capital gains apply to crypto held for less than 12 months and are typically taxed at your ordinary income tax rate (up to 37% in the US). Long-term capital gains apply to assets held 12 months or longer and benefit from reduced rates — 0%, 15%, or 20% in the US depending on your income bracket. In India, all crypto gains are taxed at a flat 30% plus 4% cess regardless of holding period. The distinction is critical for tax planning: holding an additional month or two can sometimes save thousands in taxes.

Question 2

Do I owe capital gains tax on staking rewards?

Accepted Answer

In most jurisdictions, staking rewards are taxed twice: first as ordinary income when received (at the fair market value on the date received), and again as capital gains when you later sell or trade those tokens. In the US, the IRS treats staking rewards as taxable income. In India, staking income falls under the 30% flat crypto tax. The cost basis for future capital gains calculations is the fair market value at the time you received the rewards.

Question 3

How does DeFi farming income get taxed differently from capital gains?

Accepted Answer

DeFi yield farming typically generates two types of taxable events: the rewards you earn (treated as ordinary income at fair market value when received) and any capital gains when you sell, swap, or withdraw those reward tokens. Liquidity pool deposits and withdrawals may also trigger capital gains events if the value of your tokens has changed. The complexity of DeFi taxation often requires specialized tracking software — this calculator handles the capital gains portion for individual transactions.

Question 4

How do I calculate cost basis for crypto acquired in multiple purchases?

Accepted Answer

When you buy the same cryptocurrency at different times and prices, you need to determine which coins you are selling. Common methods include FIFO (First In, First Out — assume you sell the oldest coins first), LIFO (Last In, First Out), and Specific Identification (choose exactly which coins to sell). FIFO is the default method accepted by the IRS. Your cost basis is the purchase price of the specific coins being sold under your chosen method, plus any transaction fees paid to acquire them.

Question 5

Can I offset crypto losses against other capital gains?

Accepted Answer

In the US, yes — crypto losses can offset capital gains from other investments (stocks, real estate, etc.), and up to $3,000 of net capital losses can be deducted against ordinary income each year, with excess losses carried forward. In India, crypto losses can only offset gains from other Virtual Digital Assets (VDAs) — they cannot offset stock market gains or salary income. Tax-loss harvesting — strategically selling losing positions — is a common technique to reduce your overall tax bill.

Question 6

What tax rate should I use for crypto in India?

Accepted Answer

India imposes a flat 30% tax on all cryptocurrency gains under Section 115BBH, regardless of income level or holding period. Additionally, a 1% TDS (Tax Deducted at Source) applies on all crypto transactions above specified thresholds. There is also a 4% health and education cess applied on top of the 30% tax, making the effective rate approximately 31.2%. No deductions are allowed except the cost of acquisition — you cannot deduct trading fees, transfer costs, or any other expenses.

Question 7

Do I need to report crypto taxes if I only swapped tokens?

Accepted Answer

Yes. In virtually all jurisdictions, swapping one cryptocurrency for another (e.g., trading BTC for ETH) is a taxable event — it is treated as selling the first asset and buying the second. The capital gain is calculated based on the fair market value of the received token at the time of the swap minus your cost basis in the token you gave up. This applies to DEX swaps, token migrations, and wrapping/unwrapping tokens (e.g., ETH to WETH) in many cases.

Crypto Tax Calculator — Estimate Tax on Crypto Gains