Handling taxes on crypto purchases

[boophomet]

I'm going through taxes right now and it seems like the IRS is taxing crypto more seriously so I'm going through my coinbase records to prepare the 1099. They ask for the purpose of my transactions to wallets off exchange to determine the tax event. Obviously I don't want to tell the IRS "I bought controlled substances with crypto" but I also don't want to dig myself a hole by reporting completely incorrectly.

My process for using crypto follows:
Buy LTC (mostly) -> send to personal wallet -> exchange for xmr (for vendors that accept, for vendors that don't ignore this step) -> send payment to vendor

Since I'm sending to my own wallet from the exchange technically the event would be sending a transfer to myself, but the IRS could simply look at the receiving wallet that coinbase logged and see that it no longer holds the coins. Is this not as big of a deal as I'm making it out to be or should I report these as payments to be safe?

 

[17SS]

I'm going through taxes right now and it seems like the IRS is taxing crypto more seriously so I'm going through my coinbase records to prepare the 1099. They ask for the purpose of my transactions to wallets off exchange to determine the tax event. Obviously I don't want to tell the IRS "I bought controlled substances with crypto" but I also don't want to dig myself a hole by reporting completely incorrectly.

My process for using crypto follows:
Buy LTC (mostly) -> send to personal wallet -> exchange for xmr (for vendors that accept, for vendors that don't ignore this step) -> send payment to vendor

Since I'm sending to my own wallet from the exchange technically the event would be sending a transfer to myself, but the IRS could simply look at the receiving wallet that coinbase logged and see that it no longer holds the coins. Is this not as big of a deal as I'm making it out to be or should I report these as payments to be safe?

Unless you made a profit during the transactions, I don’t see what the big deal is.

I tried to keep all of my transactions under the new threshold.

 

[HeatherSwanson]

I'm going through taxes right now and it seems like the IRS is taxing crypto more seriously so I'm going through my coinbase records to prepare the 1099. They ask for the purpose of my transactions to wallets off exchange to determine the tax event. Obviously I don't want to tell the IRS "I bought controlled substances with crypto" but I also don't want to dig myself a hole by reporting completely incorrectly.

My process for using crypto follows:
Buy LTC (mostly) -> send to personal wallet -> exchange for xmr (for vendors that accept, for vendors that don't ignore this step) -> send payment to vendor

Since I'm sending to my own wallet from the exchange technically the event would be sending a transfer to myself, but the IRS could simply look at the receiving wallet that coinbase logged and see that it no longer holds the coins. Is this not as big of a deal as I'm making it out to be or should I report these as payments to be safe?

Tell them you were gambling on sports events and lost it?

 

[havanabanana]

Use koinly, works great for me

 

[SBD1]

Buy local. Tighter spreads, lower fees, better anonymity, new friends.

 

[HeatherSwanson]

Buy local. Tighter spreads, lower fees, better anonymity, new friends.

Hi fellow gym goer.
Do you happen to know where I can buy aromatizing anabolic steroids? You look like you might be able to help me out.

Like that? Or is there a better T-up?

 

[SBD1]

Hi fellow gym goer.
Do you happen to know where I can buy aromatizing anabolic steroids? You look like you might be able to help me out.

Like that? Or is there a better T-up?

I was referring to purchasing crypto currencies locally

 

[HeatherSwanson]

I was referring to purchasing crypto currencies locally

When I need crypto, I get a non custodial wallet like exodus and get my Buddy that has about 200 btc and give him cash 5% under market value. Both happy.

 

[SBD1]

When I need crypto, I get a non custodial wallet like exodus and get my Buddy that has about 200 btc and give him cash 5% under market value. Both happy.

Your totally 100% real unique situation does not help the guy who posted this thread come to a reasonable solution.

 

[brovercleveland]

Currently in the same situation as you @boophomet. Does anyone know the best way to add details to coinbase transactions when it's generally buying and transferring the same day?

 

[LGOP528]

Tell them it was for a Chinese cam girl named Tracy.

 

[LGOP528]

Not taxable

• Buying crypto with cash and holding it: Just buying and owning crypto isn’t taxable on its own. The tax is often incurred later on when you sell, and its gains are “realized.”
• Donating crypto to a qualified tax-exempt charity or non-profit: If you give crypto directly to a 501(c)(3) charitable organization, like GiveCrypto.org, you may be able to claim a charitable deduction.
• Receiving a gift: If you’re lucky enough to get crypto as a gift, you’re not likely to incur a tax until you sell or participate in another taxable activity like staking.
• Giving a gift: How thoughtful! You can gift up to $18,000 per recipient per year without paying taxes (and higher amounts to spouses) for 2024 and $19,000 per recipient for 2025. If your gift exceeds these limits, you’ll need to file a gift tax return (which generally does not result in any current tax liability). If you transfer crypto to someone else outside of a purchase for goods or services, it may count as a gift, even if you didn’t mean it that way.
• Transferring crypto to yourself:Transferring crypto between wallets or accounts you own isn’t taxable. You can transfer over your original cost basis and date acquired to continue tracking your potential tax impact for when you eventually sell.

 

[Demondosage]

My advice is to buy enough above the dollar amount to make sure fees are covered and don’t make a profit on it. It’s profits that are taxed, not sending money. Your cashapp is taxable if a 3rd party business sends money to you, not when Joe blow send it to you

 

[brovercleveland]

Not taxable

• Buying crypto with cash and holding it: Just buying and owning crypto isn’t taxable on its own. The tax is often incurred later on when you sell, and its gains are “realized.”
• Donating crypto to a qualified tax-exempt charity or non-profit: If you give crypto directly to a 501(c)(3) charitable organization, like GiveCrypto.org, you may be able to claim a charitable deduction.
• Receiving a gift: If you’re lucky enough to get crypto as a gift, you’re not likely to incur a tax until you sell or participate in another taxable activity like staking.
• Giving a gift: How thoughtful! You can gift up to $18,000 per recipient per year without paying taxes (and higher amounts to spouses) for 2024 and $19,000 per recipient for 2025. If your gift exceeds these limits, you’ll need to file a gift tax return (which generally does not result in any current tax liability). If you transfer crypto to someone else outside of a purchase for goods or services, it may count as a gift, even if you didn’t mean it that way.
• Transferring crypto to yourself:Transferring crypto between wallets or accounts you own isn’t taxable. You can transfer over your original cost basis and date acquired to continue tracking your potential tax impact for when you eventually sell.

First off, thank you @LGOP528 and @Demondosage if what im gathering from yall is that i dont have to file my coinbase stuff? I def didnt spend 18k worth. No one wants the IRS knocking on their door.

 

[LGOP528]

If it’s a gift, it’s not taxable.

I also use stable coins so there is no possibility of capital gains.

#Hitting maxes and evading taxes

 

[brovercleveland]

If it’s a gift, it’s not taxable.

I also use stable coins so there is no possibility of capital gains.

#Hitting maxes and evading taxes

I appreciate it. I had logged in a while ago and tax shit popped up and had me wondering.

 

[BeardedGuy]

So, doing taxes and Coinbase just called all of my crypto purchases short term investments and counted them as taxable events… I was using Coinbase to buy ETH to send off for speculative trading, no gains realized, and to buy Sol to send to Exodus for purchases of peps and such.
It really affected my filing. Unless I’m missing something, I don’t think I’m using Coinbase or PayPal as an on-ramp ever again.

 

[Biglittlejoe]

So will I get into trouble if I don’t report my bitcoin purchases on cashapp to pay for PEDs when I file my tax return?

 

[Buffed Shark]

So will I get into trouble if I don’t report my bitcoin purchases on cashapp to pay for PEDs when I file my tax return?

Obviously not. This post is so dumb youndont pay income tax/capital gains tax on purchases. As far as anyone is concerned and if you need to disclose it which is also not smart. You can say sent money/gift/lending a friend.

 

[BeardedGuy]

Obviously not. This post is so dumb youndont pay income tax/capital gains tax on purchases. As far as anyone is concerned and if you need to disclose it which is also not smart. You can say sent money/gift/lending a friend.

That’s not true.
If you can’t show ownership of the same crypto for more than a year, you have a taxable event.
Whether you report or not is up to you.
Chat says:



You trigger a capital gain or loss
When you spend crypto, you’re considered to have sold it for its fair market value (FMV) at that time.

• You owe tax on the difference between what you paid (your cost basis) and the FMV when you used it.
• Example:

You bought 0.01 BTC for $300.

• Later, that 0.01 BTC is worth $400 when you use it to buy a TV.
• You have a $100 capital gain ($400 − $300).

If you held the crypto:

• Less than 1 year → short-term capital gain (taxed as regular income)
• More than 1 year → long-term capital gain (usually lower tax rate)

2. The purchase itself isn’t deductible
You can’t deduct the cost of the item purchased (like you would for an investment loss). The item just becomes your new property at its purchase price — the FMV of the crypto on the day of purchase.

3. You must report it

You’ll need to:

• Report the sale/disposition on Form 8949 and Schedule D.
• Include the date acquired, date disposed, cost basis, FMV, and gain/loss.

If you used a crypto debit card, trading platform, or exchange, they may provide transaction data — but they often don’t track cost basis for off-platform buys, so you need your own records.