How Does the “Cost Basis” Apply to Calculating Capital Gains in Crypto Trading?

The cost basis is the original value of an asset for tax purposes, typically the purchase price plus any transaction fees. To calculate a capital gain or loss, the cost basis is subtracted from the proceeds received upon disposal.

For crypto, determining the correct cost basis can be complex, especially with multiple purchases at different prices, often requiring methods like First-In, First-Out (FIFO) or Specific Identification. Accurate tracking is crucial for compliance.