van-adam / crypto-tax-report

The Crypto Tax Report calculates your taxable profits from crypto based on your transaction history.

crypto-tax-report

Table of Contents

1. Overview
   1. A glimpse into history
2. Inventory Methods
   1. FIFO (First-In-First-Out)
   2. LIFO (Last-In-First-Out)
3. Getting Started
   1. Prerequisites
   2. Pull Source Code
   3. Configuration
4. Open Source Software (OSS)
5. Disclaimer

Overview

The Crypto Tax Report calculates your taxable profits from crypto based on your transaction history and the configured inventory method, for example FIFO (First-In-First-Out) or LIFO (Last-In-First-Out).

Important Note: your transaction history is only read and processed and will not be updated, changed, or uploaded to the interweb. If you feel paranoid, make your files read-only and unplug your LAN cable or disable the WI-FI or both.

How it works

First, the script imports the buy transactions and sell transactions from XLSX files (refer to Configuration).

After that, for every sell transaction, the script takes the token quantity from as many buy transactions as needed and calculates the profits. If only a fraction of a buy transaction was used, the buy transaction is updated in the transaction history (updated in memory, not in the XLSX file). The script takes buy transactions according to the configured inventory method.

Sell transactions that are apart from their corresponding buy transactions by more than or equal to a configurable time difference, e. g. 360 days (1 year), are considered non-taxable or "tax-free" so to say.

After processing all the sell transactions, the script generates a tax report XLSX file. For every sell transaction there will be one entry in the tax report showing the sell date, token, sell quantity, buy value, sell value, profits, and taxable profits.

A glimpse into history

I created this project when I almost finished my tax declaration 2021 but still had one procrastinated part left to do - the crypto taxes. I knew what I needed to do when I would have the buy value and the sell value but how to get to the buy value of every sell transaction while considering FIFO was a mind-numbing obstacle for me. So I looked for software online that does the job for me, and I was faced with prices of three-digits for every tax year. I considered those prices ridiculous when you barely made four digits with crypto so far. Then I became aware of my basic Python skills and thought maybe I could just programm it myself. So here it is!

Inventory Methods

FIFO (First-In-First-Out)

In the FIFO inventory method, it is assumed that crypto assets that have been purchased first (First-In) are also sold first (First-Out).

For example, consider the following buy transactions:

• 1st March 2020; Quantity: 1.00; Costs: 100 EUR
• 1st March 2021; Quantity: 2.00; Costs: 400 EUR

If you sell now 1.00 tokens for 200 EUR, you would sell the tokens from the 1st transaction that happened first and not from the 2nd transaction that happened later. This results in a cost-basis of 100 EUR and you received 200 EUR.

Your capital gains would be 200 - 100 = 100 EUR.

Let us rewind and say you did sell not 1.00 but 2.00 tokens for 500 EUR. Now it gets tricky: you then would sell 1.00 from the 1st transaction and 1.00 from the 2nd transaction. This results in a cost-basis of 100 EUR + 1/2 × 400 EUR = 300 EUR because one half of 2.00 tokens you sold have been costing you 100 EUR and the other half of 2.00 tokens you sold have been costing you half of 400 EUR. This results in a cost-basis of 300 EUR and you received 500 EUR.

Your capital gains would be 500 - 300 = 200 EUR.

LIFO (Last-In-First-Out)

In the LIFO inventory method, it is assumed that crypto assets that have been purchased last (Last-In) are sold first (First-Out).

For example, consider the following buy transactions:

• 1st March 2020; Quantity: 1.00; Costs: 100 EUR
• 1st March 2021; Quantity: 2.00; Costs: 400 EUR

If you sell now 2.00 tokens for 500 EUR, you would sell the tokens from the 2nd transaction that happened last and not from the 1st transaction that happened earlier. This results in a cost-basis of 400 EUR and you received 500 EUR.

Your capital gains would be 500 - 400 = 100 EUR.

Let us rewind and say you did sell not 2.00 but 1.00 tokens for 250 EUR. You then would sell 1.00 from the 2nd transaction. This results in a cost-basis of 1/2 × 400 EUR = 200 EUR because you sold one half of tokens from the 2nd transaction costing you 200 EUR. This results in a cost-basis of 200 EUR and you received 250 EUR.

Your capital gains would be 250 - 200 = 50 EUR.

Getting Started

Prerequisites

The following prerequisites are necessary to execute the Python script:

• Python 3.6+
  • openpyxl 3.0.0+
• Ability to create .XLSX files, e.g. Microsoft Excel or Numbers by Apple.

Pull Source Code

Pull the source code from GitHub to your local machine:

git clone https://github.com/ericvancoffee/crypto-tax-report.git

Configuration

In the Python file generate_tax_report.py at the top, you can define:

1. LOG_LEVEL: log level of the script
2. TRANSACTIONS_DIR: directory from which to import the crypto transactions
3. TAX_REPORTS_DIR: directory to which to export the crypto tax reports
4. INVENTORY_METHOD: whether to use inventory method FIFO or LIFO
5. TAXFREE_TIMEDELTA: the time difference between buy and sell transactions so they are considered non-taxable/tax-free
6. tokens: token abbreviations for which to generate a tax report

The transactions are imported from preformatted .XLSX files. To see an example of such a file, please refer to the transations_example.xlsx file in the /transactions directory. The transactions files need to be named as [token]_transactions.xlsx, e.g. BTC_transactions.xlsx and placed in the TRANSACTIONS_DIR. The transactions should be sorted by date ascending.

Run Script

After configuring the script, run the script via command line: python generate_tax_report.py or via an IDE run configuration.

Troubleshooting

If you cannot run the script, make sure you activated your Python virtual environment (https://docs.python.org/3/tutorial/venv.html) in case you are using one. Usually you can easily run in command line or git bash:

source path/to/venv/Scripts/activate

Open Source Software (OSS)

This script uses open source software (OSS) that is listed below.

• openpyxl
  • license: MIT License (MIT)
  • © Copyright 2010 - 2021 openpyxl

Disclaimer

Tax laws differ from country to country. This script does not necessarily comply with the tax law in your country and does not provide any numbers directly usable for tax declaration. It is advised to test the script with some example transactions and verify whether it fits the intended purpose and whether it complies with the tax law in your country. You agree that the use of any numbers calculated by this script for a tax declaration is at your sole and exclusive risk. Grossly negligent or willingly incorrect tax declaration may constitute an offense of tax evasion. Further, we make no warranty that the script will be uninterrupted or error-free.