Are you a BlockFi user trying to file your crypto taxes?
Let’s break down how the IRS taxes BlockFi transactions and interest payments and share a step-by-step guide to filing your crypto tax return.
BlockFi is a US-based cryptocurrency wallet and exchange. It offers crypto investors low transaction fees and interest on assets like Ethereum, Bitcoin, and various stablecoins.
BlockFi was founded in 2017. The company has received funding from investors such as Coinbase Ventures, Pomp Investments, and Bain Capital Management.
Despite offering support for a limited number of cryptocurrencies, BlockFi is currently used by more than 225,000 crypto investors.
The IRS considers cryptocurrency a form of property that is subject to both capital gains and income tax.
Capital gains events: You incur capital gains or losses every time you dispose of your cryptocurrency. This may include selling your cryptocurrency or trading it for other cryptocurrencies.
Income tax events: If you earn cryptocurrency as a form of income, this is considered personal income and will be taxed accordingly.
Yes. The interest that you earn on BlockFi is considered ordinary income and will be taxed based on your personal income tax bracket.
Yes. Exchanges like BlockFi send your 1099 information to the IRS. Not reporting your BlockFi taxes can result in a fine and/or potential jail time.
BlockFi does send tax forms to its users. If you’ve earned more than $600 worth of interest and bonuses on BlockFi, the platform will provide you with a 1099-MISC form.
However, the platform does not have a complete view of most users’ cryptocurrency buying and selling history and cannot provide you with the full information that you’ll need to file your tax return.
Here’s an example that shows why it’s difficult for BlockFi to help users accurately report all of their crypto taxes.
In this scenario, BlockFi doesn’t know what David’s cost basis was for acquiring Bitcoin. Since the transaction took place on a different exchange, BlockFi doesn’t know if he acquired his tokens for $1,000, $5,000, or $10,000.
That means if David ends up selling his Bitcoin, BlockFi can have trouble accurately reporting this capital gain.
To accurately report your crypto taxes, you’ll need to record all of your transactions across multiple wallets and exchanges. While it can be difficult to track all of this information on a spreadsheet, CryptoTrader.Tax makes the process easy. With just a few clicks, you’ll be able to import your transactions from BlockFi and other exchanges.
Here’s how you can upload a full record of your BlockFi taxes into the CryptoTrader.Tax platform for automatic tax reporting.
1. Log in to your BlockFi account.
2. Click on the Reports option under the user profile dropdown menu.
3. Scroll to the very bottom of the page and click on the .csv download option to get your full transaction history downloaded to a csv file.
4. Navigate to the BlockFi tab on CryptoTrader.Tax and drag the file you just downloaded into the blue box.
And that’s it! You’ll then be able to create a crypto tax report that includes all of your BlockFi transactions.
Want to get started managing your taxes on BlockFi and other exchanges? Try out CryptoTrader.Tax, the crypto tax reporting software used by more than 100,000 investors. Get started with a free preview report - there’s no need to enter your credit card information until you’re 100% sure the information we’re giving is accurate.