As you accumulate assets over time, TaxBit creates a pool of "cost basis" that is available for disposing of based on the date they were acquired as well as the USD value paid to acquire them. Depending on your accounting method, TaxBit’s tax engine will refer to the cost basis pool for the best available asset to fit with your disposals (sales, trades, etc.).
You can view your accounting method on the My Taxes page, and you're welcome to choose between any of the three available accounting methods. You can read more about accounting methods HERE.
Here's an example of how a Cost Basis Pool would work: You purchased 1 BTC for $2,000 USD and then another 1 BTC for $10,000 USD. Your cost basis pool would contain 2 BTC in total, stored as two separate entires. Each entry in the cost basis pool would be tied to their acquisition date and the amount of USD you used to acquire the asset.
Keep in mind that you may have multiple cost basis pools for the same asset if your accounting method is set to Specific ID - HIFO by Exchange. The example above might have been two purchases on Coinbase, but if you were to also acquire two more BTC on BlockFi, you would have two different cost basis pools: one for Coinbase and one for BlockFi.
You can view your different cost basis pools using our Tax Optimizer tool. Check out our helpful guide HERE to learn more about how the Tax Optimizer works and what you can use it for.
- What is Cost Basis?
- How is the cost basis used for tax purposes?
- How can I see the cost basis of my completed transactions?
Looking for more information? Reach out to our Support Team and we would be happy to help with any questions you may have.