What is the Tax Optimizer?

In your TaxBit account, you'll see a Tax Optimizer tab on the left-hand side. This article will explain:

What is the Tax Optimizer?
How does it work?
How can I take advantage of the Tax Optimizer?

The Tax Optimizer is a tool that allows our consumers to see their potential capital gain or loss position based on current market values if they were to sell off a particular asset.

How does it work?

Within the Tax Optimizer page, you'll be able to select the asset you wish to optimize. Please note, an asset will only show if you have a current coin balance for it. The Tax Optimizer uses the transactional data shown in the My Transactions page to calculate your balances. If your transactions don’t show you’re holding an asset, it will not display in the Tax Optimizer.

As you can see in the screenshot above, the Tax Optimizer page shows three different values at the top.

The values are:

Total Market Price. This shows the total of your combined assets current market value combined.
Total Cost Basis. This shows the total value of the combined cost basis of all your assets, in other words, the price at which you acquired the assets.
Unrealized Position. This shows the potential losses you could be incurred by disposing of all of your assets.

Once you’ve selected an asset, you'll see similar totals specific to that particular asset. You’ll notice your asset balances are split between any cost basis pools where you’re holding your asset.

Using your transactional data to calculate coin balances, the Tax Optimizer takes any unused cost basis for the selected coin and compares it to the current market value in order to determine your potential gains or losses. As you can see, this is separated out by each pool where you have a cost basis. The action is completed by subtracting the market price from the cost basis in each pool.

Notice there’s an unrealized loss of $11.10, indicated by the negative sign; an unrealized gain of $0.06 is shown in two places within this window.

Once you click Optimize Losses, the Tax Optimizer shows how much of the asset you’d want to dispose of, where to dispose of the asset, and the capital loss you’d incur.

How can I take advantage of the Tax Optimizer?

TaxBit’s Tax Optimizer allows you to see the potential tax impact of your trades before they’re conducted. As a result, it will help you minimize your tax liability.

With that in mind, you can optimize your taxes by trading or selling assets where you’ve got unrealized losses; the Tax Optimizer allows you to take advantage of crypto tax-loss harvesting.

Please bear in mind, the Tax Optimizer works best with the HIFO by exchange accounting method. You can read and learn more about the different accounting methods that TaxBit offers HERE.

What should I use the Tax Optimizer for and how? (coming soon)
Why are my balances in the Tax Optimizer off?
A Quick Guide to the Wash Sale Rule and Cryptocurrency

Still have questions? Please reach out to us directly using the in-app Support widget in the bottom-right of your screen or email support@taxbit.com and we'd love to help you out!