How do you calculate the realized gain or loss on the sale of crypto? Can you provide an example? What method should be used?

[MarilynG1]

For tax purposes, crypto is either considered earned income or treated as property sales.

It’s treated as a property sale (with capital gains or losses) when you:

• Sell it (like you would stock)
• Exchange it (swap one type of crypto for another)
• Spend it (use it as payment for goods and services)
• Convert it to US dollars (sell crypto to buy regular currency)

If someone pays you in crypto and then you sell it for a profit, you'll pay taxes on the income and pay the capital gains tax.

The gain is calculated like selling a stock; the difference between your Cost Basis and the Sales Price, and whether it was long-term or short-term. 

Here's more info on How to Report Crypto as Capital Gain and How Capital Gains are Taxed.

Be sure to check out our new Crypto Investor Center. 

[Alfonsor]

How do you calculate the cost basis? 

[RobertB4444]

The cost basis is what you paid for the crypto.

@Alfonsor 

[Alfonsor]

What method does the IRS accept (FIFO, HIFO, LIFO)?

[AmyC]

You can use any of them. The default is FIFO if you do not choose.