How to Calculate Cryptocurrency Trading Fees for Tax Purposes
1. Understanding Trading Fees and Cost Basis
In cryptocurrency trading, several types of fees can be incurred. Common fees include:
Transaction Fees: Charged for each transaction made on a trading platform or exchange.
Withdrawal Fees: Fees for withdrawing cryptocurrencies from an exchange to a wallet.
Conversion Fees: Costs associated with converting one cryptocurrency to another.
For tax purposes, these fees are important because they affect the 'cost basis' of your cryptocurrency. The cost basis is the original value of an asset for tax purposes, adjusted upwards by any associated acquisition costs and downwards by any depreciation. In the case of cryptocurrency:
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