Tax return: how do I calculate my crypto capital gains

Since April 7, you can declare your income for the past year on impots.gouv.fr. Among them, you must specify all your capital gains made in cryptocurrencies, once they have been withdrawn from your digital wallet and converted into euros. These gains are subject to a single flat-rate tax (PFU) called a “flat tax”, which applies to capital income worldwide and whose rate is 30% in aggregate. It includes 17.2% Social Security contributions and 12.8% income tax.

However, there is a tax deduction of 305 euros. In other words, the total capital gains are only taxable if the total gains in cryptocurrencies recovered last year exceed this amount. Among the transactions to be declared, do not forget the purchase of goods or services made in cryptocurrencies, such as the purchase of a Tesla car or an Amazon gift card in bitcoins. These transactions are considered sales of digital assets. And the capital gains associated with these sales must be disclosed.

On the other hand, exchanges between digital assets, bitcoin against ether for example, generate no tax and do not need to be declared by retail investors.

The deadline for paper declarations is approaching: it is May 19. But you do benefit from a little more time if you declare your income online: until May 24 if you live in wards from 01 to 19, until May 31 for wards 20 to 54 and until June 8 for those from 55 to 976.

A special form

Your capital gains, as well as your losses in cryptocurrencies, must be declared in Form 2086. You must also specify, on the date of each transfer, the total value of your digital wallet, as well as the purchase price of the wallet, ie the amount initially invested to fund your acquire cryptocurrencies.

In order not to miss any information and to be able to fill in the boxes of your tax return correctly, “it is therefore better to monitor your portfolio of crypto assets regularly”, warns Pierre Morizot, co-founder of Waltio, a tax return assistant of his crypto income. The boxes “order costs” and “balance received or paid” in form 2086 are not taken into account: you do not have to fill in anything there.

Once all your trades have been entered, the amount of the total capital loss or capital gain obtained over one year is automatically generated in the 3AN box for a capital gain or 3BN in case of a capital loss. This global capital gain or loss is then automatically entered online in the general form of the tax return (form 2042). It is therefore advisable to file your declaration electronically.

A little technical calculation

“Every capital gain, for every sale of cryptocurrencies, is calculated in proportion to the total value of the portfolio of digital assets. The idea is to tax a fraction of the portfolio’s total capital gains over a year,” explains Alexandre Lourimi, tax attorney at ORWL, a firm specializing in the digital economy.

Here is a concrete example to better understand this calculation: You bought 10,000 euros worth of cryptocurrency and half a year later your digital wallet is worth 100,000 euros. The potential capital gain is then 90,000 euros (100,000 – 10,000). If you decide to sell 10,000 euros worth of cryptocurrency, this will represent 10% of your portfolio at the time of the sale. The taxable capital gain will therefore amount to 10% of the global capital gain of your portfolio, or 10% of 90,000 euros. That is a capital gain of 9,000 euros taxable at 30%.

The paper declaration only offers 5 boxes for 5 transfers (sales) of cryptocurrencies during the year 2021, when the online declaration shows 20. If you exceed this number of transfers, it may be wise to attach a table to the PDF format on the chatbot of the site impots.gouv.fr, with information on all the operations you carried out in 2021.

At the very end of the return, you can indicate in the “explicit statement” box that you did not have enough boxes to declare all your capital gains from last year. Enough to show your good faith to the tax authorities. And avoid the penalties that come with willful negligence by the taxpayer.

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