Instead of completely decoupling from the legacy financial systems, crypto, NFTs, and DeFi, for the time being, are integrating into them. This means things such as taxation still apply, although there is some confusion about how it works. In this guide, we will dispel some notions about MetaMask taxes and provide a brief overview of the process and tools at your disposal.
Is cryptocurrency subject to tax? How exactly?
In most jurisdictions, cryptocurrencies are not exempt from taxation. And no, just because crypto is supposed to be decentralized or outside of government control, in practice it does not always mean you can use it without paying taxes. Since all transactions on the blockchain are transparent, they are trackable, and the tax authorities have all the means to monitor financial activity. Tax evasion consequences can range from penalties to jail time.
The differences in local regulations usually arise from the distinction on how the crypto assets are viewed from the point of view of tax legislation. The US, Australia, and the UK, for example, tax crypto assets as property, and other jurisdictions like India deem it a virtual currency. Germany, Belarus, Switzerland, and Singapore have some of the most friendly tax legislation for crypto assets.
Taxable Events and Taxes Applicable to Crypto
Generally, crypto transactions lead to two types of taxes: capital gains tax and income tax. Whether it will be the former or the latter depends on the type of taxable event. A taxable event is a transaction that incurs a tax of one type or another. Regarding crypto assets, selling, trading, or exchanging cryptocurrencies would constitute such events. Additionally, receiving cryptocurrency as payment for goods or services is also considered a taxable event. Buying crypto with fiat, transferring assets between wallets, or donating to charities are not taxable events.
You will need to report capital gains tax on selling crypto assets for more than you have purchased them. It covers not only fiat purchases but crypto-to-crypto exchanges, too. If you sold or exchanged for a loss, it still needs to be reported to record the capital loss and offset the gains.
Another procedure is applied to reporting income tax. What constitutes income when it comes to crypto assets? Prepare to be surprised: airdrops, including those resulting from a hard fork, interest, and staking rewards. Moreover, mining cryptocurrencies is also subject to taxation, but hobbyists and businesses have different conditions (in the US).
Do Your Crypto Taxes with MetaMask: How-to Instructions
With its flexibility and plug-and-play design, MetaMask is one of the most ubiquitous crypto wallets and Web3 browsers out there. For many crypto enthusiasts, it is their first and even only crypto wallet. Despite that, there is still some confusion about how it works: managing and transacting crypto works a little differently from legacy financial systems, after all.
Do I need to pay tax on my MetaMask transactions?
Yes, if you use MetaMask to send cryptocurrencies to exchanges or sell crypto assets, it is taxable, just like with any other crypto wallet or asset. What is less obvious is that you will need to file a report with all taxable events yourself: unlike banks or brokers, crypto wallets do not report to the tax authorities.
How to get tax info from MetaMask? Doing taxes is a hassle as is, but considering that so many kinds of crypto transactions fall under the taxable category, you may be intimidated at first. However, there are specialized platforms that can help you with rounding up your crypto expenses and gains. And what is the best thing about it, you can connect your MetaMask wallet to these platforms to start a report.
You can also get an Etherscan tax report spreadsheet by finding your blockchain address page and exporting the transaction history as a CSV file. Alternatively, you can use their CSV export tool and customize the date range and types of transactions. This file can also be handy if you want to use third-party software to calculate taxes from the MetaMask CSV.
Some of the most popular platforms to calculate crypto taxes are Koinly, CoinLedger.io, ZenLedger, and CoinPanda, to name a few. We will not be going in-depth for each one but will provide a brief comparison.
|Free plan?||Yes, up to 10,000 transactions||No||Yes, up to 10 transactions||Yes, up to 25 transactions|
|Scope?||20 countries; 15 blockchains, 110+ exchanges, 75 wallets||Hundreds of blockchains, wallets, and DeFi platforms||52 blockchains, 35 wallets, 100+ DeFi products||65+ countries; 800+ exchanges and wallets|
How are MetaMask gas fees taxed?
Transaction fees are something you will also need to consider when reporting crypto tax information. Luckily, they fall under another category of events: tax deductions. Tax deductions for crypto taxes refer to expenses that can be subtracted from your taxable income, thereby reducing the amount of tax you owe. Some things you can write off as expenses are mining expenses, professional services, education and research, home office deduction, and, of course, transaction fees.
MetaMask & Crypto Taxes
Does MetaMask report to the IRS? What about other crypto wallets and platforms?
As an interface to the blockchain, crypto wallets have no obligation to report to the IRS or other local tax authorities. This includes MetaMask, even though it is a versatile tool for decentralized finance.
On the other hand, centralized crypto exchanges can report your history of transactions to tax authorities. At the end of the day, it comes down to the compliance policies and whether the platform is custodial or non-custodial. In other words, if an exchange stores your crypto assets in their wallets, if a tax authority requests information, they are under an obligation to comply. MetaMask and other non-custodial crypto wallets simply do not store your personal data together with transaction history.
Can MetaMask help me with the taxes? Do they provide any forms or end-of-year reports?
Perhaps, unfortunately, but no: MetaMask cannot provide you with any form, schedule, or report for crypto taxes. Not because it is such a champion of tax evasion: as a non-custodial wallet, it simply cannot compile MetaMask tax info in a way that would be necessary for a crypto tax report.
But as we have already mentioned, there are third-party services and platforms that help you with cryptocurrency taxes specifically. So ultimately, it is up to you to report your gains and losses correctly and avoid any trouble with the law.
As enticing it is as not to pay taxes, this negligence can backfire in the least pleasant ways. Taking your time to file the reports and submitting them will save you a lot more trouble in the long run.
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Frequently Asked Questions
How do I get MetaMask tax documents?
As of now, no MetaMask tax forms are available directly. To calculate your tax liability for transactions made through MetaMask, you will need to export your transaction history from MetaMask and use tax software or consult a tax professional to determine the taxable events and calculate your tax obligations.
Does MetaMask report to the IRS?
MetaMask itself does not report to the IRS or any tax authorities. However, it’s important to note that individuals are generally responsible for reporting their cryptocurrency transactions and any resulting taxable events to the IRS or relevant tax authorities. It’s recommended to consult a tax professional or refer to official guidelines for accurate and up-to-date information regarding crypto taxes.
Does OpenSea give tax documents?
OpenSea does not provide tax documents or tax reporting services directly. However, they do provide transaction history and other data that may be useful for calculating taxes. It is recommended to consult a tax professional or use specialized tax software to accurately report and calculate taxes on OpenSea transactions.
What is the tax document for a crypto wallet?
The specific tax document for a crypto wallet may vary depending on the jurisdiction and the type of transactions conducted. Generally, individuals may need to report their cryptocurrency holdings and transactions on their tax returns, including details such as capital gains or losses. It is important to consult with a tax professional or refer to the tax laws and regulations in your specific jurisdiction for accurate information.
Do you get a MetaMask 1099?
A Form 1099-K can be provided to you by broker-dealers and includes information on aggregate transaction volume per month. Unfortunately, as a crypto wallet, MetaMask cannot provide you with an IRS Form 1099-K, but it is not a required form for MetaMask tax reporting.
Do I have to report MetaMask on taxes?
MetaMask itself is a cryptocurrency wallet and does not provide tax reporting features. However, as a cryptocurrency user, you may be required to report your crypto transactions and gains/losses for tax purposes. The specific requirements vary depending on your jurisdiction.
In the United States, for example, the IRS treats cryptocurrencies as property, and transactions involving cryptocurrencies are subject to tax reporting. This means that you may need to report your cryptocurrency transactions, including those made using MetaMask, on your tax return. Generally, you would report this information on IRS Form 8949 and Schedule D.
How do I download a crypto tax statement?
To download a crypto tax statement, you will typically need to use a cryptocurrency tax reporting software or service. These platforms can connect to your MetaMask wallet or other exchanges where you hold cryptocurrencies, import your transaction history, and generate a tax statement based on your activity. A few examples of such software are CoinTracking, CoinLedger.io, ZenLedger, and TaxBit.
How to calculate taxes from MetaMask?
To calculate taxes from MetaMask, you would need to gather all your transaction data from the wallet, including buy/sell transactions, transfers, and any other relevant information. You can then use this data to calculate your capital gains or losses and determine your tax liability based on your country’s tax laws.
Do all crypto wallets report to the IRS? What crypto wallet does not report to the IRS?
Most cryptocurrency wallets do not directly report to the IRS. However, cryptocurrency transactions are recorded on the blockchain, which is a public ledger. If the IRS has access to your wallet address and can link it to your identity, they can potentially track your transactions and holdings. It’s important to keep accurate records and report your cryptocurrency transactions to the IRS to ensure compliance with tax regulations.
Can you claim an NFT loss on taxes?
While NFTs are part of the broader cryptocurrency ecosystem, the tax treatment of NFTs may differ from other cryptocurrencies like Bitcoin or Ethereum. Moreover, tax laws regarding NFTs can vary depending on your jurisdiction. In some jurisdictions, losses from the sale or disposal of NFTs may be eligible for tax deductions or offsets against capital gains.
Do you have to pay income tax for NFT?
Depending on your jurisdiction, income generated from the sale or licensing of NFTs may be subject to taxation. The specific tax treatment of NFT income can vary, so it is advisable to consult with a tax professional or accountant who is familiar with the tax laws in your country or region. In some cases, NFT income may be treated as capital gains, similar to the taxation of traditional investments. However, there may also be specific rules or regulations that apply to NFTs, such as self-employment taxes or business income reporting requirements.
What is the IRS tax on NFT?
As of now, the IRS has not provided specific guidelines or regulations regarding the taxation of NFTs. However, it is generally advised to treat income from NFT transactions as capital gains for tax purposes, similar to the taxation of traditional investments.