A Full Breakdown of Ledger Live Taxes

I used to dread every moment of tax season, no matter if it had to do with Ledger Live taxes, or any other. But is it really that complicated?

As much as you might want to run away from Ledger wallet taxes, you simply can’t, not even if you’re a millionaire. Quoting from The Godfather, it might be wise to keep your enemies (AKA taxes) closer, for the sake of compliance.

And don’t you worry, as I’m here to explain how Ledger taxes work in baby’s terms. This idea might make you raise an eyebrow, but stick with me. Whether you’re tracking receipts solely on Ledger Flex or across exchanges like Binance, there are tools and methods that make the process feel less like a chore and more like a helping hand. Let’s dive in.

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What Are Ledger Live Taxes?

When I talk about Ledger Live taxes, I refer to taxes revolving around the Ledger hardware device overall. Since Ledger Live is the companion app of the flagship wallet, most tax actions will occur there, as you'll see later.

Right off the bat, you might realize that you need to pay taxes (or you’ve already taken care of them) when purchasing a hardware wallet from the brand.

If you buy a Ledger wallet and it gets shipped internationally, your country’s customs office may charge an import duty. The amount varies depending on where you live.

If you’re in the European Union, your order may also include VAT (averaging at 21.8% across EU countries), which is a sales tax applied to goods that you purchase.

However, Ledger Live taxes go far beyond the checkout stage. They also extend into how you report and manage your digital asset activity. And by digital asset, I am not only pointing to crypto, but also NFTs.

📚 Read More: What is NFT?

But Ledger is in a unique place. Unlike centralized exchanges like Coinbase, it isn’t required under current rules to report directly to the IRS or other local tax regulators.

While the company is exempt, you can’t just celebrate and pop a champagne yet, as you’re still on the hook to follow the tax rules. After all, those precious Bitcoins (or any crypto) sitting inside your wallet can still carry tax implications.

Taxable and Non-Taxable Activities on Ledger

If you HODL crypto, you might want to breathe a sigh of relief since you don’t have to pay tax obligations. The same rule applies when you transfer crypto from Ledger Stax to an exchange or use your tokens as collateral for a loan - you’re pretty much in the clear. Nevertheless, you’ll still need to specify them in your tax records.

📚 Read More: Ledger Stax Review

However, if you sell, trade, or convert your crypto, that’s when your friendly neighborhood taxman comes knocking.

Other activities are also subject to specific tax categories. To give you an example in the United States:

Table: Crypto tax in the US

But isn’t crypto supposed to be pseudonymous, and therefore, hard to trace? That’s partially true. When the blockchain records your transaction, it doesn’t display your name or personal details,^[1] and most people prefer to keep it that way.

And when you purchase a Ledger device, or even sign up on Ledger Live, you won’t encounter Know-Your-Customer (KYC) checks upfront. But the moment you interact with exchanges, brokers, or other on-ramps, a paper trail begins.

Tax agencies like the IRS or ATO have sufficient means to trace your activity. They’re more than well-versed to perform blockchain analysis, and they can seamlessly connect wallet addresses to real identities.

The short takeaway is that Ledger gives you privacy and control, but it doesn’t make you immune from taxation. If you’re trading, swapping, or earning crypto, the responsibility to report those transactions rests squarely on your shoulders.

Local and Global Tax Percentages

I already explained the types of crypto transactions that are taxable events. That’s only scratching the surface, though, because taxes come in different rates. Each type of transaction also triggers unique obligations, and ultimately, local laws carry the most weight.

Crypto tax isn’t as cut-and-dry as buying regular goods, either. Understanding how the latter works makes it easier to navigate the former. Say you buy a pair of sneakers for $20 and you live in Ohio, where the sales tax rate is 5.75%. At the cashier, the tax adds up to $1.15, bringing your total bill to $21.15.

Now, time to put yourself in the shoes, I mean, the new sneakers, of a crypto trader. When you use USDT to buy BTC, that’s technically a trade, and the IRS considers it taxable.

Check out the guidelines below on the percentage and limits you need to set aside:

• If you hold the crypto for one year or less before trading it, the asset falls under short-term capital gains tax, which ranges from 10% to 37%.
• If you keep the assets for more than a year, your holdings are subject to long-term capital gains tax. The rates are set at 0%, 15%, or 20%.
• If you lose money selling or trading crypto, you can use that loss to lower your tax bill by up to $3,000 of other income each year, with extra losses carried forward to future years.
• Earnings above $600 from staking, mining, yield farming, airdrops, or other earning activities are treated as income tax events, which fall between 10% to 35%.

I’d suggest noting these down, since they’ll come in handy when you decide the type of tax reports to prepare later.

How about if you live outside the US? Some crypto-friendly countries are lucky enough to call themselves “tax havens”, namely Malaysia, Cyprus, and Hong Kong.^[2] In Germany, you’ll get a special tax-free privilege if you hold crypto for more than a year.

Several regions also impose relatively low crypto taxes, ranging from 1 to 19%. These include Indonesia, Vietnam, Argentina, and South Africa. On the other hand, certain nations like France and South Korea enforce much higher rates at over 20%.

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How to Report Ledger Live Taxes Manually

Do you have to file taxes on Ledger? Certainly, yes, but be aware that you can go around doing this via either the manual or automatic method.

If you prefer the manual route, check out the instructions below. They're geared toward the US users, but I'll also sprinkle some tips for international traders along the way.

1. Download Your Transaction History

Here's a kicker: Ledger doesn’t provide any tax report templates, so if you go the manual way, you’ll need to do a bit of accounting work. Nevertheless, you can still download your raw transaction history as a CSV file. I’d recommend using a PC for convenience.

Here’s how you do that:

No matter whether you process Ledger Flex or Ledger Nano X taxes, the general reporting process will share similarities. The only difference lies in how you pair your device, so just follow the tutorial that matches your model. If you use Ledger Flex, this review contains instructions on how to set up the wallet.

The hard work doesn’t end here. Review the transaction report thoroughly and verify that no data is missing. If you spot any gaps, cross-check them using block explorers like Etherscan.io for Ethereum, Polygonscan.com for Polygon, and Minscan.io for Cosmos transactions (ATOM, INJ, OSMO, etc).

2. Prepare the Appropriate Forms

Once you’ve retrieved the missing records, it’s time to do a task often glamorized in rom-coms: preparing tax forms. In reality, there’s nothing romantic about it, especially as established earlier, Ledger doesn’t provide ready-made tax report templates.

Instead of building them from scratch (since that’ll potentially take an eternity), I’d suggest going to the IRS website (if you’re based in the US) and downloading the official forms directly. To give you some clues, you’ll likely need:

• Form 1040. The primary requirement for reporting general cryptocurrency activities such as buying, selling, or trading.
• Form 8949. These cover crypto trades, sales, or exchanges as capital assets. They’re taxed based on their holding period, categorized into short-term or long-term.

• Schedule C and Schedule SE. These documents only become necessary when your full-time, part-time, or freelance job revolves around crypto (and you store your earnings in Ledger). Whether you’re mining or running a digital asset enterprise, you must declare them to the IRS as self-employment income.
• Form 1099-MISC and Form 1099-NEC. These forms cover staking rewards, promotions, or mining income. The IRS will then match what exchanges or brokers reported with your returns.
• Schedule 1. These reports count staking payouts and promotional incentives as ordinary income. It’s obligatory to file these even without a 1099 Form.

If you’re not from the US, double-check the specific forms and filing obligations set by your country’s tax authority. UK residents, for instance, need to notify their crypto transactions to HM Revenue and Customs (HMRC) using SA100 for crypto income and SA108 for gains and/or losses.

Meanwhile, the Australian Taxation Office (ATO) sees crypto as a capital gains tax (CGT) asset, similar to the IRS. Therefore, you’ll need to disclose all profits and/or deficits on your yearly tax returns.

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3. Calculate Your Tax

Once you’ve gathered your forms, grab a calculator and put on your accounting hat. It’s time to calculate your crypto taxes by determining your cost basis, or the total amount paid to acquire your crypto. This encompasses the market or original price in USD (or any currency) and additional transaction costs like gas fees.

Here's an example. Let's say you purchased 0.1 SOL on Kraken for $18.86. Add a maker fee of 0.1% as well as an additional $0.0024 gas fee, and your cost basis would round up to $18.88.

At first glance, the calculation appears to be simple math, and that holds true if you only consider a single purchase. As a trader, though, you’ve probably moved heavy volumes and transacted across multiple assets at varying prices. So, things get more complex.

Instead of burning hours tallying each transaction manually, consider using an accounting method to fast-track the process. Frameworks like FIFO, LIFO, HIFO, and Specific ID determine which batch of tokens you sold first and the cost basis to measure profits and/or losses.

If you’re not sure which one to go with, let’s do a comparison:

Table: Cost basis accounting methods for Ledger wallet taxes

No matter which method you choose, the final figure should be the same. Be extra careful when doing your calculations. A tiny slip can raise your total rates. For instance, if you input the wrong purchase date, you might incorrectly turn long-term into short-term gains, and you’ll need to cover the extras.

Once you’re done crunching your numbers, congratulations, you can now confidently submit your crypto tax reports online or go to the nearest IRS office.

How to Report Ledger Live Taxes Automatically

Call a spade a spade, but I’d take sitcom binging over number-crunching any day. But hey, everyone’s got free will. If you’re like me, here is how to put your Ledger Live taxes on autopilot. To tell you the truth, it takes a bit of tinkering, but the process is quicker overall.

1. Pick a Taxation Software

A notable perk when handling Ledger Flex or Ledger Nano X taxes is how the wallet seamlessly integrates with a range of apps that make your life easier.

Among them are crypto tax software, and you read it right, they’re compatible with all Ledger models.

Here are some digital asset tax tools in the market I’ve tested and found to be worth recommending:

Table: Comparison of different crypto tax software on Ledger

ZenLedger is a solid choice if you’re looking for a US-compliant option with minimal clutter. It is SOC-2 compliant, highly user-friendly, and the built-in support for NFT taxes adds a nice touch for multi-asset baggers.

However, ZenLedger mainly caters to US customers. If you’re in the EU, CoinTracker might be a better fit with its extensive library of country-specific tax forms. It also packs robust integrations, which come in handy if you use Ledger in conjunction with other exchanges like Binance or Bybit. For businesses managing crypto treasuries, the enterprise solution might be what you’re looking for.

If you find that CoinTracker is too pricey, CoinLedger has a free plan that lets you import and track unlimited transactions, along with 100 micro-transactions covering staking, NFTs, DeFi, interest, and margin trades. It can also seamlessly connect with general-purpose tax software, such as TurboTax, H&R Block, and TaxAct. There is no limit to the number of exchanges and wallets you can sync from, either.

But if you mainly use Ledger for Web3 interactions, like swapping and yield farming, you might want to go with Koinly. Compared to others, its free plan boasts a significant perk, especially if you’re a frequent trader who averages around 100 transactions per month.

It can natively sync with EVM chains, generate international reports, and filter spam transactions. Mind that Koinly does not support Two-Factor Authentication (2FA).

Ultimately, the best choice depends on your trading habits, region, and budget. Take the time to weigh these options carefully before committing to a platform.

2. Install the App

So, how do you file taxes on a Ledger-compatible software? Get started by adding the app to Ledger Live. For demonstration, I’ll use ZenLedger, but the steps can be replicated across other platforms. It’s when you get to the technicalities that the finer details will vary.

Follow along to install ZenLedger and connect the app to your hardware wallet:

And with the app live and ready, let’s get on and import your transactions.

3. Import Your Ledger Transactions

ZenLedger actually allows you to manually enter your transaction details. But if you prefer a more time-saving method, here’s how to import Ledger transactions into ZenLedger before using them for tax filing later on:

Pretty neat that you don’t have to handle the math yourself, right? Onto the next act, building your tax report. Don’t click anywhere else just yet. The next tutorial will also take place right on this page.

In case you’re lost, no worries, you can always go back to the [Tax Pro] page from the main menu.

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4. Generate Your Tax Form

ZenLedger automatically calculates the cost basis of your Ledger Live taxes with the FIFO method. Simply click [Change] if you want to switch to LIFO or HIFO.

Before proceeding, ensure that ZenLedger’s tax calculations come out correctly. There shouldn’t be any duplicate entries that’ll distort your tax rates, either. For this, on the left sidebar, you’ll see the option to [Review Transactions]. There, you’ll also be notified if anything needs your attention. Click [Review] to solve any issues.

Once everything checks out, here’s how to generate your tax form:

📚 Read More: Crypto Tax-Loss Harvesting

And that’s that. As a cherry on top, don’t forget to file your taxes with the IRS, either online or offline. For traders in other countries, experiment with other crypto tax solutions and apply the steps above as your starting point. Many of the steps are not replicable, but they’re still transferable, no matter what interface you’re using.

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Conclusions

And that’s how you do your Ledger Live taxes. Mastering the theory and following each step precisely doesn’t instantly make you an accountant. Nevertheless, you’ve become a crypto trader who understands taxes well, and there aren’t many of you out there!

The manual method might tempt anyone who wants to exercise their accounting skills. For this, you’ll need to download your raw transaction history on Ledger Live along with the tax form on the official IRS website. After that, you’ll do the calculation yourself. The commonly accepted method is FIFO.

If you’re like me, a person who savors the simple things in life, you might prefer using tools like ZenLedger. Once you install the app on Ledger Live, simply import your CSV file and generate your tax forms.

The content published on this website is not aimed to give any kind of financial, investment, trading, or any other form of advice. BitDegree.org does not endorse or suggest you to buy, sell or hold any kind of cryptocurrency. Before making financial investment decisions, do consult your financial advisor.

Scientific References

1. Kanza, Y., Safra, E.: 'Cryptotransport: Blockchain-Powered Ride Hailing While Preserving Privacy, Pseudonymity and Trust';

2. Novak, M., Pochesneva, A.: 'Toward a Crypto-Friendly Index for the APEC Region'.