#CryptoFees101

When you trade cryptocurrency, the platform deducts various fees that influence how you’re taxed. Here's a clear breakdown:

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🧾 1. Types of Trading Fees

1. Exchange (Trading) Fees

Charged by centralized exchanges (like Binance, Coinbase) when you buy or sell.

Typically include “maker” (providing liquidity) and “taker” (taking liquidity) fees.

2. Network (Gas/Blockchain) Fees

Paid to miners/validators for processing your transaction on-chain (e.g., Ethereum “gas” fees).

Fluctuate based on congestion, block size, and transaction priority.

3. Wallet / Withdrawal / Network Transfer Fees

Charged by wallets or exchanges when you move crypto off-platform or between wallets.

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2. How Fees Affect Taxes

✅ A. Buying Crypto

**Add fees to cost basis:**

If you purchase crypto for $100 and pay a $2 fee, your cost basis becomes $102.

🟰 B. Selling Crypto

**Subtract fees from proceeds:**

If you sell crypto for $150 and pay a $3 fee, your net proceeds are $147.

🔄 C. Trading One Crypto for Another

If you pay fees in either the currency you're selling or another token, the fee counts toward both cost basis and proceeds.

E.g., trading BTC for ETH and paying fee in BTC: deduct it from proceeds and add its cost basis.

🚫 D. Transfers Between Personal Wallets

Transferring crypto from your own wallet to another isn't a sale—but spending crypto on network fees is considered a disposal and may generate capital gain/loss.

E.g., sending 1 BTC and paying 0.001 BTC fee: that 0.001 BTC disposal is a taxable event.

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3. Why This Matters

Benefit Explanation

Lower taxable gains By adding buy fees and subtracting sell fees, your reported gain is smaller (or loss is larger).

Clear record-keeping Proper documentation ensures accuracy on tax forms (e.g., IRS Form 8949, Schedule D).

Different treatment if you're a trader/business Individual investors adjust cost basis; professional traders may deduct fees as business expenses.