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2023-10-26

How Investing vs Trading impacts tax

In most cases of buying and selling cryptocurrency as a retail investor, you are participating in investing rather than trading. The two are treated differently for tax purposes.

  • Investing is subject to capital gains tax or income tax, depending on the nature of the transaction.
  • Trading in this case refers to self-employment which is subject to income tax and National Insurance Contributions.

The key difference between investing and trading – along with the different tax treatments, is how losses generated in the crypto-activity can be used.

In their guidance, HMRC have explicitly stated that they would expect it to be exceedingly rare that any crypto-activity constituting buying & selling crypto would be classified as “trading”.

If you are uncertain, speak to a tax advisor as there are always exceptions, including but not limited to, developing tokens and large scale mining.

How is crypto tax calculated in the United States?

You can be liable for both capital gains and income tax depending on the type of cryptocurrency transaction, and your individual circumstances. For example, you might need to pay capital gains on profits from buying and selling cryptocurrency, or pay income tax on interest earned when holding crypto.

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26
 
Oct
 
2023
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10
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What is a read-only API?

Everything you need to know about read-only APIs.

Key takeaways
This tax guide is regularly updated: Last Update  
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To understand what a read-only API is, first we have to understand what an API is more generally. API stands for ‘application programming interface’. It is a set of definitions and protocols used when building application software. Previously, we’ve gone into detail on how smart contracts work. An API is not too different, in that it lets products communicate with each other. As an example, if a second party is connecting to an API, the API’s contract will dictate how the second party can interact with its product. APIs are built to simplify the interoperability of products so that they can interact with each other with minimal friction.

What is the difference of a read-only API?

If an API is used to facilitate interoperability between software, what is the difference between that and a read-only API? In the crypto world, read-only APIs are used by platforms to allow their users to share information with other applications. A read-only API restricts the second party interacting with it so that they cannot modify or action anything, and can only “view” the available data. An example of this in practice is granting crypto tax software (like us!) read-only access to an exchange account so we can aggregate your transaction history on that platform for your tax purposes. In contrast, an example of a trading API would be granting a trading bot full reign over your exchange account to make trades on your behalf.

How does Summ use APIs?

The majority of our 600+ integrations allow for API connections to streamline the aggregation of your crypto transaction history. Our software will never require anything more than ‘read-only’ or ‘view’ API keys, meaning that we can never access your crypto assets, but merely can provide you with your historical data.

As an example, let’s look at how Summ (formerly Crypto Tax Calculator)’s software interacts with Binance’s API. If a user wants to create an API connection between the two platforms, they can follow the steps outlined on this page. Doing so will allow Summ to request your transaction history from the Binance API in order to load your transactions so that you can begin to calculate your taxes. The benefit of importing data via an API over a CSV is that it enables our software to keep your transaction records up to date. If you choose to import your data with a CSV, then you will have to re-upload a CSV to maintain up-to-date trading records. An API connection will maintain these records for you as long as you click the ‘resync’ button when you want an updated view.

Disclaimer: The content of this guide is for general informational purposes only. It is not legal or tax advice. Viewing this guide, purchasing or using Summ does not create an attorney-client relationship or a tax advisor-client relationship.

The information in this guide represents the opinions of experienced crypto tax professionals; however, some of the topics in this guide are still subject to debate amongst professionals, and tax authorities could ultimately release guidance that conflicts with the information in this guide. The information contained in this guide is based on the authors’ interpretation of current guidelines. Changes to the guidelines may be retroactive and could significantly alter the views expressed herein. Therefore, use this information at your own risk and for information purposes only.

Consult a professional regarding your individual tax or legal situation.

Le informazioni fornite su questo sito Web sono di natura generale e non costituiscono consulenza fiscale, contabile o legale. È stato preparato senza tenere conto dei vostri obiettivi, della vostra situazione finanziaria o delle vostre esigenze. Prima di agire in base a queste informazioni, è necessario considerare l'adeguatezza delle informazioni rispetto ai propri obiettivi, situazione finanziaria ed esigenze e chiedere una consulenza professionale.
Summ (precedentemente Crypto Tax Calculator) declina ogni e qualsiasi garanzia, impegno e garanzia, espressa o implicita, e non è responsabile per eventuali perdite o danni di sorta (inclusi errori umani o informatici, negligenti o di altro tipo, o perdite o danni incidentali o consequenziali) derivanti da o in connessione, qualsiasi utilizzo o affidamento sulle informazioni o sui consigli contenuti in questo sito web. L'utente deve accettare l'esclusiva responsabilità associata all'uso del materiale presente su questo sito, indipendentemente dallo scopo per il quale tale uso o risultati vengono applicati. Le informazioni contenute in questo sito non sostituiscono la consulenza specialistica.

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