This article explains the importance of proper categorization and provides descriptions of each category, helping you understand how they work and when to use them.

Despite our efforts to automate categorization, there may be times when you need to categorize your transactions manually.

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The accuracy of your portfolio values and tax reports depends on how complete your imported data is and how correctly your transactions are categorized. Leaving transactions uncategorized or assigning them to the wrong category can lead to inaccurate values in your portfolio and tax reports. Hence, it’s essential that you select the correct categories.

To identify uncategorized transactions, follow these steps based on your plan:

The figures in your report do not include these specific categories.

You can find the following listed transactions in the Miscellaneous Expense Report.

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:

The Incoming and Outgoing categories are used when we don't have enough information to auto-categorize a transaction. If we are unsure whether a transaction is incoming or outgoing, it will be assigned the Unknown category. Uncategorized transactions do not trigger a capital gains event.

You have the option to treat ‘Incoming’ and Outgoing’ as ‘Buy’ and ‘Sell’. Check this guide to learn more.

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.

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'

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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:

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 include, but are not limited to:

Example: The ‘Send’ and ‘Receive’ transactions in the table below will be grouped into a ‘Transfer’ as they satisfy the auto-matching criteria.

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The Fiat Deposit or Fiat Withdrawal categories are used when you deposit or withdraw fiat currency into or out of a fiat onramp exchange.

Examples:

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

The Airdrop category is used if you acquired cryptocurrency due to an airdrop. Proceeds from airdrops do not trigger an immediate capital gains taxable event. It can be treated as income and trigger an income tax event depending on your 'Airdrop' category tax toggle. Any future sale of the cryptocurrency is a capital gain event with a cost basis the same as the airdrop’s value when you received it.

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.

The Interest category is used if you acquired cryptocurrency due to interest-bearing activities that don't suit any of the other categories. Examples include 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:

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.

The Personal Use category 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 than a Sell transaction.

Read more: Personal Use Category

The Lost or Stolen categories are used if you have lost cryptocurrency or 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).

Read more: Lost, Stolen or Hacked Crypto

The Gift category 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.

The Outgoing Gift category is used when you give cryptocurrency as a gift. It can be treated as taxable or non-taxable. Check the Tax toggle - Treat outgoing gift as non-taxable disposal guide for more information.

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 we typically recommend making this transaction a Sell.

The Fee category is used if you have disposed of cryptocurrency to cover the cost of fees generated due to other transactions.
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Example:

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

The Ignore-in or Ignore-out categories are used to ignore a particular transaction from tax and balance calculations. This is a useful 'soft' alternative to deleting a transaction.

The Failed In or Failed Out categories are 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. However, the transaction failed because the gas limit set was too low to cover the required fee. While the transfer didn’t go through, the gas fee was still charged by the Ethereum network.

The Realized Profit or Realized Loss categories are 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 🎬

The Loan category 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 will be used as the cost basis for future sales of the borrowed asset.

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The Margin Fee category represents a fee or interest paid to maintain an open loan position. This can be associated with margin trades, futures trades, CFD, derivative trades, and standard loans).

The Loan Repayment category 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.

Learn more: Reconciling a Margin Trade Borrow and Repayment 🎬

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.

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

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.

A Cross Chain Trade is used when you completed a cross-chain swap involving trading assets on one chain for different assets on another. If the transactions are not grouped, you can categorize the incoming transaction as Cross Chain Buy and the outgoing transaction as Cross Chain Sell.

If you have any questions or need help, we're here for you! Feel free to reach out to us via the in-app chat in the bottom-right corner or send your inquiries to [email protected].
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