Your cost basis tracking selection determines how your purchases and sales are recorded in your portfolio. This helps track how much you paid for an asset, known as its cost basis.
When you sell or trade an asset, your cost basis tracking selection helps figure out if you made a capital gain or loss, which affects how much tax you may owe.
There are two options for tracking cost basis:
- Per-Wallet: Tracks transactions separately for each wallet.
- Universal: Combined transactions from all wallets, but is no longer available for US taxpayers.
Tracking cost basis in CoinTracker
Per-Wallet tracking method
The Per-Wallet option keeps separate queues for each cryptocurrency within each specific wallet. As a result, the cost basis for a cryptocurrency sold from a particular wallet will come exclusively from that wallet, ensuring clarity and compliance with regulatory frameworks.
Example
You purchased the following BTC across two wallets:
Wallet A
- 1 BTC on June 1, 2018 for $7,000
- 1 BTC on March 1, 2019 for $4,000
Wallet B
- 1 BTC on February 1, 2023 for $17,000
- 1 BTC on August 25, 2023 for $26,000
During 2024, you make the following sales:
- 2 BTC from Wallet A on December 1, 2024 for $95,000 each
Selling bitcoin using HIFO (Highest In, First Out):
- Sale price: $190,000 (2 × $95,000)
- Cost basis: $11,000 ($7,000 for the first BTC from Wallet A + $4,000 for the second BTC from Wallet A)
- Long-term gain: $190,000 - $11,000 = $179,000
This example shows how the Per-Wallet method calculates gains using only the transactions from the specific wallet where bitcoin was sold.
Universal tracking method
With the Universal tracking solution, all transactions for a given cryptocurrency across various wallets are combined into a single queue. This means that the cost basis used for a sale can come from any connected wallet, regardless of where the sale occurs.
Example
In our previous example, if we apply the Universal tracking method, selling bitcoin using HIFO (Highest In, First Out) would result in:
- Sale price: $190,000 (2 × $95,000)
- Cost basis: $43,000 ($26,000 for the first BTC + $17,000 for the second BTC from Wallet B, HIFO from the combined queue)
- Long-term gain: $190,000 - $43,000 = $147,000
This example shows how the Universal method calculates gains by grouping transactions across all wallets.
Can I switch from Per-Wallet to Universal tracking?
Yes, you can switch between per-wallet and universal tracking in CoinTracker settings. However, it’s important to choose the method that aligns with your country’s tax regulations, as requirements differ. Consult local guidelines or a tax advisor to ensure compliance.
What are the implications of compliance and per-wallet tracking?
Non-compliance can lead to discrepancies and potential inquiries from tax authorities. Reporting requirements vary by country, with most favoring per-wallet tracking, but others favoring universal tracking. Check your local regulations to ensure accurate reporting. CoinTracker supports both methods to help meet your compliance needs.
How does the tracking method affect gains over time?
The Universal or Per-wallet tracking method can affect when you experience gains or losses, which could be sooner or later based on where you hold and dispose of your assets. The tracking method does not change your overall taxable gains when aggregated across tax years.