Robinhood has become one of the most popular platforms amongst the younger demographic for buying, selling, and investing in a variety of assets. Included in these offerings is the ability to invest in cryptocurrencies. Unlike cryptocurrency exchanges such as Coinbase, Gemini, Bittrex etc, Robinhood Crypto does not allow users to transfer crypto into or out of the Robinhood platform. This factor makes tax reporting much different for Robinhood cryptocurrency investors. In this article we address how to handle your Robinhood cryptocurrency transactions for your tax reporting.
In most countries, cryptocurrencies like bitcoin are treated as property for tax purposes, not as currency. Just like other forms of property—stocks, bonds, real estate—you incur a tax reporting requirement when you sell, trade, or otherwise dispose of your cryptocurrency for more or less than you acquired it for.
As a result, cryptocurrency trading looks similar to stock trading for tax purposes.
For example, if you purchased 0.2 Bitcoin for $2,000 in May of 2018 and then sold it two months later for $3,000, you would have a $1,000 capital gain. You report this gain on your tax return, and depending on what tax bracket you fall under, you pay a certain percentage of tax on the gain. Rates fluctuate based on your tax bracket as well as depending on whether it was a short term vs. a long term gain. This applies for all cryptocurrencies.
We discuss the fundamentals of crypto taxes in greater depth in our blog post, The Ultimate Guide To Cryptocurrency Taxes.
Robinhood isn’t a native cryptocurrency company. What is meant by this is that Robinhood is not built “on-chain”, and it does not allow you to send crypto assets to a “Robinhood wallet”. You can only buy and sell cryptocurrencies directly on Robinhood. You cannot send the BTC you buy from Robinhood to your own external wallet. You also cannot send BTC from your external wallet into your Robinhood account. Everything must happen within the Robinhood platform.
While many would argue that this is “anti-crypto”, it does allow Robinhood to export necessary gains and losses tax forms to their users at the end of the year.
Unlike true cryptocurrency exchanges such as Coinbase or Gemini, Robinhood knows exactly how much you gained or lost from your crypto investments because every single buy, sell, or other transaction happened within its walls.
Coinbase and other crypto exchanges on the other hand, do not have this ability, as you have the ability to send crypto into Coinbase or out of Coinbase at any time. Whenever you partake in this type of transfer, Coinbase loses the ability to give you complete gains and losses reports. We detail this problem in extreme depth in our blog post here: Why cryptocurrency exchanges can’t give users accurate tax reports.
Because Robinhood is not a “native” cryptocurrency company, it is indeed able to give a complete gains and losses report to its users. This Form is known as 1099-B.
You can download your 1099-B right from your Robinhood account. Similar to other types of tax documents received at year end (W2 etc), you can import this 1099-B that you receive from Robinhood into tax filing software such as TurboTax or give it directly to your tax professional to file on your behalf.
You do not need to import this 1099-B into specific crypto tax software like CryptoTrader.Tax. Again, this is because all of your gains, losses, cost basis, and proceeds are already completely listed out on the 1099-B that you receive from Robinhood. No need to do it twice.
If you use other traditional cryptocurrency exchanges in addition to Robinhood, you will need to aggregate those transactions from those other exchanges to create your necessary gains and losses tax forms. You can use cryptocurrency tax software like CryptoTrader.Tax to pull together your transactions from all of the other exchanges you use and generate necessary tax reports with the click of a button.
You should not include Robinhood trades within these aggregated reports. These should be handled separately—remember this is because Robinhood is completely separate.
If you are using TurboTax or any other tax filing software, you should import your TurboTax CSV that CryptoTrader.Tax exports as well as your 1099-B that Robinhood exports into your TurboTax account. When you upload both of these, all of your transactions will be included within your tax return. No data will be double counted.
Have any questions? Feel free to chat with our live customer support team. The team is happy to help answer questions and will get back to you extremely quickly!
Disclaimer: This guide is provided for informational purposes only. It is not intended to substitute tax, audit, accounting, investment, financial, nor legal advice.