Crypto tax is confusing enough, and Cardano staking taxes are important to understand if you plan on earning ADA rewards!
This guide is designed to help you find the best Cardano staking tax calculator, and figure out how to calculate your crypto taxes when staking Cardano.
As always, it is advisable to consult a tax professional to help you navigate your crypto tax and to help prepare your tax return, even if you use a tax filing software like turbotax.
Best Cardano Tax Calculator
Any crypto tax calculator which supports the Cardano blockchain will work. However, if you have started to stake Cardano or participate in it's defi ecosystem you can't expect the tax calculator to automatically recognize these transactions.
That means that either you will have to manually review, label, and reconcile the transactions yourself.
Or, you can hire use to do all of the work for you. You can request a free crypto tax review and we'll help you set up the tax calculator and give you a quote to fix the errors.
The crypto tax calculator we use for clients with Cardano transactions is called Koinly.
How Does Cryptocurrency Tax Software Help?
Cryptocurrency tax software can help with Cardano taxes by automatically tracking whether your transactions are subject to capital gains tax or subject to income tax.
The tax software will calculate gains and losses from Cardano transactions and saves you time and effort in accurately reporting your Cardano holdings to tax authorities.
The software can also generate necessary tax forms and provide guidance on how to properly report Cardano transactions, ensuring compliance with tax laws.
How to import your Cardano wallet transaction data into Koinly?
Koinly and other crypto tax software makes it easy to import your cardano wallet transactions. All you have to do is
- Copy the public key address for your cardano wallet
- Navigate to the "wallets" tab in Koinly
- Click "add wallet or exchange"
- Search for "Cardano"
- Paste your public wallet address and click save
- Wait for the software to import your cardano transaction data and load your balances.
How to download and export a Cardano CSV file
To download and export a Cardano CSV file, you can start by navigating to the wallet or platform where you can access your Cardano transaction history like https://cardanoscan.io/ or https://explorer.cardano.org/
Look for an option to export your transaction history as a CSV file.
Once you find this option, follow the prompts, select the date range you want to export the history, and download and save the file to your computer.
After the file is downloaded, you can then open it in a spreadsheet program such as Microsoft Excel or Google Sheets to send to your tax professional or upload it to a crypto tax software.
However, if using a crypto tax software, you can just use your public wallet address to automatically import the transactions off the blockchain.
How To Get Your Cardano Tax Report
To get your Cardano tax report, you can use a crypto tax reporting platform or software that supports Cardano transactions. Simply connect your Cardano wallet or exchange account to the platform and it will automatically generate your tax report based on your transaction history. Make sure to review the report for accuracy and completeness before using it for tax purposes.
To download your report from Koinly, navigate to the "Tax Reports" page, select the tax year(s) you need reports for, and download the Complete Tax Report. This is an easy-to-read report you can provide to your accountant. The complete transaction history is also a useful report.
How Cardano rewards are taxed
This section will explore how cardano rewards are taxed in the U.S. and Australia. Make sure that you understand the tax implications of cardano rewards for your tax office.
How are ADA staking rewards taxed?
Tax on ADA staking rewards depends on the tax laws and regulations in your country.
In the US and Australia, Cardano staking rewards are considered taxable income the same way other proof-of-stake clockchain rewards aretaxed, The way the tax is calculated is that you pay income tax on the fair market value of the ADA tokens at the time they are received. The total tax you will pay depends on your income tax rate.
How to calculate Cardano staking taxes
Example
If your income tax rate is 32%
You earn 300 ADA. The value of your ADA in fiat currency is $100
You take $100 earned x 32% tax rate = $32 income tax owed.
Other Tax Implications of Cardano Staking Rewards
When you receive the 300 ADA in the example above, because you have paid income tax on the tokens, $100 is now your cost basis for the tokens.
If the value of your 300 ADA tokens goes up to $200, then what happens when you sell your ADA?
You pay income tax for the tax year when you received the ADA.
And then you will pay capital gains tax when you sell the ADA.
In this example:
You have 300 ADA with a $100 cost basis.
You sell 300 ADA for $200.
You received $200 - $100 cost basis = $100 capital gains.
How is Cardano DeFi taxed?
Cardano defi is taxed the same as defi for other cryptocurrencies.
The tax implications depend upon how your tax office categorizes the type of transaction. For example, although Defi lending is considered a loan in the US and not a capital gains tax event, the ATO has released guidance that if you lend your Cardano, then you will pay capital gains tax.
Why Can't Cardano Generate My Tax Forms?
Cardano is a blockchain that is meant to be decentralized. Because there is no centralized authority, there is nobody to generate or send you tax forms.
Even if there was a centralized authority, users of the Cardano blockchain are pseudonymous. Therefore, they would not know your country of origin to calculate your cardano tax according to your local tax laws.
Does Cardano report to tax authorities?
As mentioned before, Cardano is a blockchain without a centralized authority, and Cardano accounts are pseudonymous. This means that there is no information about what country a Cardano wallet address is from.
As such, it would not be possible for Cardano to report to tax authorities.
But because Cardano's blockchain has a public ledger like Bitcoin, transactions on Cardano are viewable by anybody. If the tax authorities had a way to tie your identity to your wallet address, then they would be able to view your transaction history directly on the blockchain.
Can the IRS track Cardano transactions?
The IRS could theoretically track your Cardano transactions. They have partnered with crypto tax software providers to be able to better audit taxpayers who are suspected of evading tax obligations.
If you have on-boarded US dollars through an exchange where you have verified your identity, purchased ADA tokens, and sent them to a and from a cardano wallet then they might be able to track your transactions.
Get Expert Help With Calculating Your Crypto Taxes
Hopefully this article has clarified the confusing world of taxes when using cardano.
If you need help saving time and money get your Cardano tax done, you can request a free crypto tax review and we'll help you set up the tax calculator and give you a quote to fix the errors.