Categorize Transactions

Guidelines for correctly assigning categories to transactions for accurate reports.

Shane Brunette avatar
Written by Shane Brunette
Updated over a week ago

It is really important that you make sure you have imported all your data from all possible sources. Our algorithm is often smart enough to auto-categorize your activity when you add more data.

Once done, you will need to review the categories. If you see any "Incoming/Outgoing" transactions, you will need to manually confirm these two categories since we did not have enough information to do this for you.

In-depth descriptions for each category are available further below;

Common Transactions

  • You bought cryptocurrency. This is not a taxable event.

  • You sold cryptocurrency. This triggers a capital gains tax event.

  • You transferred cryptocurrency but still maintained ownership (i.e., the transactions between your own wallets/exchanges).

Advanced Incoming Transactions

  • You received "free" tokens as part of a promotion or similar.

  • Used to transfer the cost basis from one chain to another. This category must match with another transaction categorized as 'Bridge Out'.

  • You received a cash-back from a credit card payment etc.

  • Use this if you acquired a new cryptocurrency as a result of a chain split (such as Bitcoin Cash being received by Bitcoin holders).

  • You have withdrawn these coins from a borrowing/lending platform. This acts similar to a deposit into your account.

  • A failed transaction. This will be ignored from tax and balance calculations (warning: any fees incurred from creating the transaction will be accounted for).

  • You wired fiat into exchange from your bank account.

  • You received a gift from a third party (e.g., a family member).

  • Ignore transactions from tax and balance calculations.

  • You received income in crypto. You can also categorize commissions etc in this category.

  • You received interest for lending your cryptocurrency.

  • You received or borrowed crypto/fiat as a result of providing collateral.

  • You received crypto as a mining reward.

  • This acts similar to a 'buy'. A common use case is when a user is minting NFTs.

  • You received profit from trading derivatives (e.g. futures/margin).

  • You have received tokens for adding coins into a liquidity pool.

  • You have removed these coins from a liquidity pool.

  • Payments provided automatically to the creator of an NFT from secondary sales.

  • Mark the transactions as spam, and ignore them from tax and balance calculations.

  • You earned interest from staking.

  • You have withdrawn these coins from the staking pool. This acts similar to a deposit

Advanced Outgoing Transactions

  • You have added these coins into a liquidity pool

  • Approval

    You approved the use of a smart contract. This is taxed the same way as a Fee, a disposal event. This is listed in the Miscellaneous Expense Report.

  • Used to transfer the cost basis from one symbol to another. Note: Must match with another transaction categorized as 'Bridge In'

  • Burn

    Use this if you have sent your crypto / NFT to a burner address. It triggers a capital loss event similar to the stolen category.

  • You have set these coins aside as collateral for a loan. This acts as a withdrawal from your account.

  • This acts similar to a Sell and is listed in the Miscellaneous Expense Report. However, you wish to label this as an expense. You can use this if you want to categorize an outgoing transaction as an expense (e.g. business paying out a salary).

  • A failed transaction. This will be ignored from tax and balance calculations. (Note: Any fees incurred from creating the transaction will be accounted for.)

  • You had a miscellaneous expense. A standalone "Fee" is listed in the Miscellaneous Expense Report.

  • You cashed out from your exchange, hopefully, more than you put in.

  • Ignore transactions from tax and balance calculations.

  • You lost cryptocurrency and want to claim the cost basis as a tax deduction.

  • You were trading on leverage and got margin called.

  • You paid the debt back on a loan.

  • You made an interest payment on a loan.

  • You gave a gift to a third party e.g. a family member.

  • You made a personal use purchase and want to claim this as non-taxable (warning: check with your accountant before using this to make sure you satisfy the criteria)

  • You made a loss when trading derivatives (e.g., futures/margin).

  • You have returned tokens for removing coins from a liquidity pool.

  • You deposited these coins into a staking pool. This acts similar to a withdrawal.

  • You lost cryptocurrency and want to claim the cost basis as a tax deduction.

What about the more complex transactions?

There are many transaction types that are only being used in crypto. We have specific guides for all these categories.


To better understand these different categories, detailed below is an overview of each transaction category and its tax implications:

Incoming/Outgoing

These are the default categories that are used if we are unable to auto-categorize the transaction or make an accurate assumption as to what the category should be. To be on the safe side, an incoming transaction is marked as Incoming, as it is considered as a transfer of the underlying asset (from a tax perspective).

Similarly, an outgoing transaction is marked as an Outgoing as it is considered as a transfer of the asset, which will not trigger a capital gains tax event. If we are not sure if it is either an incoming or outgoing transaction, we will assign the Unknown category and you should update the category accordingly.

The Incoming and Outgoing transaction types will also impact the balance remaining for the particular wallet/exchange/account; an incoming transaction will increase the account balance remaining, and an outgoing transaction will decrease this. They, however, do NOT change the Overall Balance as they can be between your wallets/exchanges/accounts or not. So we don't change your overall balance before they are categorized accordingly. The Unknown transaction type will not affect the balance remaining.

Buy

A Buy transaction represents the acquisition of the underlying asset (i.e. the purchase of the cryptocurrency). It's used to calculate the cost basis for future cryptocurrency sales. This does not trigger a capital gains tax event.

Sell

A Sell transaction represents the disposal of the underlying asset (i.e. the sale of the cryptocurrency). As a result, this sale triggers a capital gains tax event. The capital gain/loss is calculated based on the cost base of the asset (the price at the time of sale + any additional fees incurred due to the acquisition/disposal of the asset) and the value of the asset at the time of sale.

Specifically, the capital gain/loss is the 'received amount' minus the 'cost base'

Learn more:

A Send or Receive transaction is used to represent the movement of an asset between different wallets, exchanges, or accounts, where you maintain control of the underlying asset. As you do not 'dispose' of the asset, this transaction type does not trigger a capital gains tax event.

Examples:

  • Sending cryptocurrency from an online exchange to your hardware wallet.

  • Receiving cryptocurrency from an online exchange to your hardware wallet.

  • Depositing cryptocurrency to a staking contract where you maintain ownership of the asset.

  • Withdrawing cryptocurrency from a staking contract where you have maintained ownership of the asset.

If our auto-matching transfer algorithm has been able to link together a Send and Receive transaction, then it will be marked as a Transfer. Criteria for being auto-matched includes, but is not limited to:

  • the 'Send' and 'Receive' transaction occurs less than 1 hour apart and the 'Send' is earlier than 'Receive',

  • the underlying cryptocurrency transferred is the same,

  • the underlying quantity and valuation are similar (taking into account any fees paid) for both the 'Send' and 'Receive'.

Example:

  • You import data from Exchange A, which has a 'withdrawal' of 1 BTC. Additionally, you import data from Exchange B, which has a 'deposit' of 1 BTC. Both transactions occur within a 15-minute time frame. As a result, our algorithm will group these two separate transactions together as a Transfer.

Learn more:

Fiat Deposit/Withdrawal

A Fiat Deposit or Fiat Withdrawal transaction is used when you deposit or withdraw fiat currency into or out of a fiat onramp exchange.

Examples:

  • Depositing fiat onto an exchange from your credit card.

  • Withdrawing fiat from an exchange into your bank account.

Chain Split

A Chain Split transaction is used if you acquired a new cryptocurrency as a result of a chain split (such as Bitcoin Cash being received by Bitcoin holders). There is no income or capital gains tax event at the time of receiving the new cryptocurrency. The new cryptocurrency received will have a cost basis of $0 for future trades.

Please note you must take care to determine which of the underlying assets is the 'continuation' of the original chain and which is the 'new' chain.

Airdrop

An Airdrop transaction is used if you acquired cryptocurrency as a result of an airdrop. Proceeds from airdrops do not trigger an immediate capital gains taxable event but are classified as income and trigger an income tax event. Any future sale of the cryptocurrency is a capital gain event with a cost basis the same as the income price.

Example:

  • You are airdropped 5 YFI when its price is $100/YFI, and you sell a week later when the price is $10,000/YFI. Your income is $100 and capital gains are $9,900.

Mining

A Mining transaction is used if you acquired cryptocurrency as a result of mining activities as a hobby (e.g. BTC mining). The tax implications of the mining transaction will depend on the tax laws of your local jurisdiction.

Interest

An Interest transaction is used if you acquired cryptocurrency as a result of interest-bearing activities which don't suit any of the other categories (e.g. earnings from lending, DEFI yield farming, high-interest cryptocurrency savings account, etc.

Proceeds from interest do not trigger an immediate capital gains taxable event but are classified as income; any future sale of the cryptocurrency is a capital gain event with a cost basis the same as the income price.

Example:

  • If you received 100 Sushi when its price is $10/SUSHI, you sell one month later when the price is $1/SUSHI, your income is $1,000 and capital loss is $900.

Note: We do not count Liquidity Pool Tokens as income but instead treat them as normal trade/crypto-crypto swaps (buys & sells).

Income

An Income transaction is used if you receive cryptocurrency through a salary, wage, or another form of general income (including referrals, completing surveys, etc).

Proceeds are classified as income, based on the price when the transaction occurs. Any future sale of the crypto is a capital gain event with a cost basis the same as the income price.

Personal Use

A Personal Use transaction is used if you have disposed of cryptocurrency for the purpose of purchasing goods or services. Please contact your accountant if you decide to use this transaction category as it will have different tax implications compared to a Sell transaction.

Lost/Stolen

A Lost or Stolen transaction is used if you have lost cryptocurrency or have had it stolen (e.g. 'rugged' by scammers). This will trigger a capital loss tax event, where the loss = ($0 - the cost base of the cryptocurrency).

Gift

A Gift transaction is used if you have received cryptocurrency as a gift. Similar to a Buy transaction type, the capital gain/loss is calculated based on the price at sale and the price when the gift is received. Receiving cryptocurrency as a gift does not trigger a capital gain or income tax event.
​
​Note:

If you are giving a gift to someone else in the form of cryptocurrency, and as a result, you are disposing of the asset (for CGT purposes), then typically we recommend making this transaction as a Sell.

Fee

A Fee transaction is used if you have disposed of cryptocurrency to cover the cost of fees generated as a result of other transactions.
​

Example:

  • Fees paid when withdrawing cryptocurrency from a centralized exchange to your personal wallet.

  • Gas fees paid during on-chain Ethereum/E swaps when interacting with decentralized exchanges. You can read more details about Ethereum gas fees here.

Cashback

A Cashback transaction is used if you have acquired cryptocurrency as a cashback (e.g. credit card cashback). Classified similar to a 'Buy' transaction type (the cost base at the time of acquisition), this transaction type does not trigger an income event.

Ignore In/Out

An Ignore In or Ignore Out transaction is used for ignoring a particular transaction from tax and balance calculations. This is a useful 'soft' alternative to deleting a transaction.

Failed In/Out

A Failed In or Failed Out transaction is used for marking failed transactions (whether in or out). The transaction itself will be ignored from tax calculations, but any fees incurred from creating the transaction will be accounted for.

Example:

  • You tried to send ETH to someone during a period of high network congestion and you ran out of gas.

Realized Profit/Loss

A Realized Profit or Realized Loss transaction is used for margin, futures, derivates, etc. type trades, where a profit or a loss has been realized on the trade. Proceeds from these trades count are classified as income.

Learn more: Understanding a Margin Trade 🎬

Loan

A Loan transaction is used when you have borrowed cryptocurrency or fiat (typically via a lending platform) using collateral. This does not trigger a capital gains tax event - it's used to calculate the cost basis for future sales of the borrowed asset.

Learn more:

Margin Fee

A Margin Fee transaction represents a fee or interest paid to maintain an open loan position. This can be associated with margin, futures, CFD, derivates, etc. types of trades, as well as standard loans.

Loan Repayment

A Loan Repayment transaction is used when repaying the collateral on a loan. This is separate from any fees or interests charged for maintaining the loan. The disposal of cryptocurrency can trigger a capital gain (or loss) on the difference from your purchase price.

Liquidation

A Liquidation transaction is used when the lending, margin, or futures trading platform has liquidated your supplied collateral to cover their losses. This typically is caused by the inability to pay back a loan or due to price volatility (i.e. getting margin called). This will trigger a capital loss tax event, where the loss = ($0 - the cost base of the cryptocurrency), as you are disposing of the asset and receiving nothing in return.

Collateral Deposit

A collateral deposit is used when depositing crypto collateral into a protocol in order to borrow or take a loan against your crypto.

Collateral Withdrawal

A collateral withdrawal is used when you have paid back the loan you have taken against crypto collateral and you are now withdrawing the initially deposited collateral from the lending protocol.

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