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Crypto Tax Questions on Reddit: What the Community Has to Say 2023


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Overview of Common Crypto Tax Questions on Reddit

The cryptocurrency community on Reddit often discusses the confusing world of crypto taxes. Below are some of the most frequently asked questions about crypto taxes that come up on Reddit.

Why do I have to pay taxes on crypto? Is crypto taxable?

This is likely the most common crypto tax question on Reddit. The confusion stems from cryptocurrency being an emerging asset class that many governments have been slow to provide clear guidance around.

However, in the United States, the IRS has stated that cryptocurrency is considered property for federal tax purposes. That means:

  • Selling or trading crypto for fiat currency or other assets is a taxable event
  • You owe capital gains taxes similar to investing in stocks or bonds
  • If you held the crypto for over a year, you qualify for long-term capital gains rates

So in essence, the same general tax principles for property apply to crypto. But the complexities of tracing crypto costs basis across years of trading on multiple platforms introduce new challenges.

How can I calculate taxes owed on crypto trades?

With frequent trading across different exchanges, calculating crypto taxes can become extremely complex:

“I day trade occasionally on Coinbase Pro and Gemini ActiveTrader. I also do DeFi on half a dozen sites. I have no idea how people manually track cost basis across all these trades. Does everyone just estimate their cost basis for taxes?” – u/DeepDayTrader

In the traditional equities world, brokerages provide investors with Form 1099 tax documents summarizing gains and losses. But most crypto exchanges don’t provide these tax forms.

As a result, manual calculation becomes unrealistic for most active crypto traders. Instead, many Reddit users recommend using one of the available crypto-focused tax software solutions that can import historical trade data from connected exchanges and wallets to generate capital gains/losses reports.

Are crypto mining rewards, staking rewards, and airdrops taxable?

Consensus from the Reddit community is that crypto mining and staking rewards are generally taxable as ordinary income. The IRS has also provided guidance that airdrops and hard forks constitute taxable income.

However, there are still gray areas around how to value these rewards at the time of receipt. And whether minor income from this activity can be exempt in certain cases.

In addition, some Reddit posts question whether simply holding proof-of-stake assets in a wallet to enable staking should count as a taxable event if the rewards are not claimed. But most submissions suggest declaring all mining and staking activity to stay compliant.

“I claimed my ETH staking rewards but didn’t sell any ETH. Do I still have to pay taxes on it even when I haven’t sold?” – u/StakingSquirrel

What tax software can handle crypto taxes?

Dozens of exchanges, DeFi protocols, NFT platforms and software services now enable various crypto transactions. As activity across these touch points increases, calculating aggregate taxes becomes nearly impossible manually.

To address this challenge, crypto-specific tax software tools have emerged that connect to wallets and exchanges via API to automatically track and determine tax implications on all on-chain activity.

Some of the crypto tax solutions commonly referenced on Reddit include:

The Koinly review thread in particular features glowing recommendations and input from dozens of Redditors on using Koinly for handling every crypto tax scenario.

How do I handle crypto taxes if I’m trading across multiple exchanges?

Consolidating tax reporting across activity on centralized exchanges, DeFi platforms, NFT marketplaces, and other earning/spending touch points represents a major pain point discussed on Reddit.

Again, some type of automated crypto tax software built to handle diverse crypto tax use cases emerges as the predominant solution referenced rather than trying to manually compile activity across platforms. The key requirements highlighted include:

  • Integrations with all major exchanges (Binance, Coinbase, Kraken, etc.) as well as leading DeFi protocols and NFT platforms
  • Ability to handle complex transactions like staking rewards, miner payouts, airdrops, and margin/futures trading
  • Robust crypto-specific tax loss harvesting features
  • Cryptocurrency audit support and tools to manage IRS notices






Reddit Community Feedback on Crypto Tax Challenges

In addition to the numerous tax policy questions from crypto owners, some overarching complaints and challenges also permeate discussions around crypto taxes on Reddit.

Difficulty Tracking Crypto Cost Basis Across Years of Trading

The single most common struggle voiced on Reddit is difficulty tracking cost basis for tax calculations after years of active trading across different wallets and platforms.

Unlike stocks purchased and sold on a single brokerage account, most crypto enthusiasts use dozens of avenues to acquire and move assets. This fragmentation leads many Reddit contributors to confess keeping poor (or nonexistent records). When tax season comes around, they scramble to compile transaction history.

  • “I’ve been trading crypto since 2017 across something like 10-15 exchanges. Never kept any records because I naively didn’t think I had to. Now I’m totally screwed trying figure out taxes I owe…I have no idea how to even start reconciling transfers between exchanges or what my net gains are.” – u/LookingForHelp88

Others admit to actively avoiding taxes in previous years due to the reporting complexity across exchanges. This compounds issues as they now attempt to reconstruct records and get compliant.

Collectively, thousands of posts demonstrate how widespread this difficulty tracking cryptocurrency taxes has become. It serves as a warning for others to start early with crypto tax preparations rather than delaying.

Confusion Around How Staking, Mining and Other Activities Should Be Taxed

The emerging crypto asset class enables earning opportunities like staking, mining, airdrops, and forks that have no clear precedent in existing tax code. As Reddit contributors try wrapping their heads around how to account for related income, more questions than answers tend to arise:

  • “I received monthly staking rewards on my ETH for the past 14 months but haven’t sold any. When I claim the next reward cycle, is that a taxable event? Do I owe taxes on it before selling?” – u/Atlantic_ETH_Staker
  • “If I was mining Bitcoin years ago and was paid BTC to my wallet, but have just been holding it since without selling, do I still owe taxes on the BTC I was paid even before selling?” – u/Early_Miner_Retiree
  • “I have over a dozen crappy airdropped tokens from different DeFi platforms that were worth a few dollars when I got them but have done nothing with since. Is there some minimum income threshold where I actually have to bother reporting these for taxes?” – u/DeFiDropHunter

The lack of clear IRS guidance on these gray areas likely contributes most to the confusion. As a result, Reddit exchanges feature various interpretations and heated debate trying to determine reasonable approaches to handling related taxes.

Struggles Finding Software That Supports Complex Crypto Tax Scenarios

As traders share Crypto Tax Horror Stories on Reddit, many ask for software recommendations that can handle their specific complex tax situation:

“Has anyone found a good solution for tracking and filing crypto taxes with mining, staking rewards, hundreds of transfers between exchanges, DeFI transactions, swaps, and NFT purchases? Seems like none of the tax softwares actually work for complex crypto taxes.” – u/JohnDoeRedditor

However, users routinely highlight Koinly as the leading tax solution purpose-built for the full range of crypto activity – including aggregating activity across centralized and decentralized platforms to calculate capital gains, income, and deductions.

“Just plugged my Binance, Coinbase, Metamask, and 10 other wallets/platforms into Koinly. Took 10 minutes to sync everything accurately with their API connections. Literally tracks every transaction across DEXs, NFTs, and DeFI platforms perfectly.” – u/KoinlyFanBoy

So while no solution provides official tax advice, Koinly appears uniquely positioned to handle the edge cases and complexity of crypto taxes based on recurring Redditor testimonies. Their full integration coverage, crypto-specific features like tax loss harvesting, and free plan tier also resonate as differentiators.

Tips from Reddit Users on Approaching Crypto Taxes

Amid the sea of crypto tax questions on Reddit, some quality tips on navigating cryptocurrency taxes also emerge within the commentary:

Start Early and Track Trades in Real-Time

The single most repeated piece of advice echoes the old adage that “an ounce of prevention is worth a pound of cure”. In the case of crypto taxes, starting early on trade reconciliations and tax calculations saves massive headaches down the road.

  • “I know it’s a pain, but enter your crypto transactions into a spreadsheet or tax software after every single trade. Trying to recreate your records years later when you suddenly owe the IRS a fortune is literally a nightmare I don’t wish upon anyone.” – u/XRP_GOD

Specifically, maintaining a CSV transaction export from connected exchanges and DeFI platforms provides source material to compute taxes when needed. Letting reconciliation slide for months on end compounds complexity when reconstructing activity.

Use Crypto Tax Software Built for Crypto Asset Complexity

Given the unique tax implications around emerging asset categories like stablecoins, decentralized finance protocols, staking rewards, NFTs and more – purpose-built crypto tax solutions excel at handling related reporting complexity. They understand nuances like handling crypto forks, transfers between platforms, mining payouts, and margin trading that trip up traditional tax prep solutions.

The best platforms provide direct API connections to exchanges and wallets to automatically track transaction history. This prevents needing manual inputs that inevitably lead to missing or inaccurate tax data.

Consult a Tax Professional Experienced with Crypto

While software can track transaction history and compute capital gains/losses/income, every crypto investor faces unique circumstances. Finding a tax professional well-versed in crypto accounting and regulations provides confidence you receive applicable deductions while remaining compliant.

“I thought I had a handle on my crypto taxes after using Koinly for tax prep over the last few years. But after consulting a crypto CPA this tax season, they identified new deductions and strategies for offsetting some previous gains that will save me thousands!” – u/TaxSznProBono

Be sure to ask about experience handling cryptocurrency taxes before engaging a new tax professional. Most standard CPAs and preparers lack crypto asset familiarity at this still early stage.

Maintain Thorough Crypto Trade Records and Documentation

Meticulously tracking trade activity reduces uncertainty if the IRS selects your return for audit. This includes retaining records on:

  • Exchange documentation for trades like transaction receipts and monthly statements
  • Wallet addresses used for sending/receiving crypto or interacting with DeFi protocols
  • Blockchain history tying wallets to your identity
  • Explanations for large crypto withdrawals/deposits
  • Supporting data on any crypto tax calculations like outputs from reconciliation software

Presenting clean documentation that traces funds from acquisition to disposal demonstrates good faith efforts at accurate tax reporting.

Future Outlook – Calls for Updated Crypto Tax Policy

Frustrations around existing crypto tax guidance frequently spill over into debates on Reddit around the need for regulatory reform:

Requests for Simpler, Clearer Regulatory Framework

The murky, complex territory of crypto taxes leads many Reddit posters to call for simplified tax rules. Namely, guidance around acceptable approaches to tracking and reporting crypto income associated with staking, mining, and claiming other network rewards/assets.

“I’m all for paying my fair share of taxes. But the way crypto is taxed now versus how it actually gets used makes little practical sense and desperately needs updated guidance.” – u/HonestCryptoTaxes

Greater clarity would allow taxpayers to self-report with confidence rather than resistance due to perceived unfairness or unreasonable tracking expectations given crypto market realities.

Criticisms of Unclear IRS Guidance

Uncertainty around IRS enforcement approach also draws criticism around whether taxpayer violations stem more from innocent mistakes rather than willful deception:

“The IRS needs to publicly state they won’t immediately crucify people trying to pay crypto taxes for small mistakes or misunderstandings when reporting in this complex, emerging area.” – u/CryptoTaxBuilder

Clearer safe harbor provisions could encourage voluntary compliance by reducing fears that even innocent reporting discrepancies based on interpreting incomplete IRS rules could prompt severe penalties.

Suggestions for Tax-Deferred Crypto Retirement Accounts

As a budding asset class, several Reddit posts highlight the opportunity to encourage long-term crypto adoption and commitment to tax compliance by offering tax-advantaged vehicles mimicking existing retirement accounts like 401ks and IRAs:

“It would be incredible if the IRS introduced something like a Bitcoin Roth IRA. No taxes on growth in the account and tax-free withdrawals. I’d move a decent percentage of my portfolio into that!” – u/LongtermBulls

The ability to invest in crypto tax-free until withdrawals at retirement could incentivize greater upfront tax payments from taxpayers.

Based on responses and engagement on relevant posts, formal proposals around crypto retirement accounts appeal widely to the Reddit community investor base.


Discussions around crypto taxes on Reddit demonstrate perceptions mirroring greater society – a combination of uncertainty, frustration, and a desire for updated regulatory clarity from the IRS.

Until more formal guidance materializes from governing bodies, leaning on collective wisdom and insights from peers within the crypto community helps taxpayers interpret reasonable solutions for staying compliant. Software assistance also plays a pivotal role in enabling accurate tax preparations amid the inherent complexity of transacting across different blockchains and exchanges.

While regulatory reform takes shape, taking advantage of available crypto tax tools, consulting tax professionals versed in this emerging asset class, and maintaining thorough documentation can help crypto investors report obligations accurately and avoid missteps.