The rush for the killer bitcoin tax-calculation app begins with Libra

Home » The rush for the killer bitcoin tax-calculation app begins with Libra
Image source: http://www.flickr.com/photos/zcopley/

Image source: http://www.flickr.com/photos/zcopley/

When the IRS announced last month that bitcoin was to treated as property, rather than as currency, many in the virtual currency community declared it a catastrophe. The panic was understandable, as capital gains taxes can be significantly more complicated to calculate, and often require the assistance of an accountant. But almost as soon as the concerns surfaced, others in the high-finance side of bitcoin, such as Chamath Palihapitiya, declared it to be a huge win. Investors, particularly long-term ones, know that capital gains taxes tends to be extremely favorable compared to income tax.

Today, bitcoin accounting startup Libra became the first to announce an app that would bridge the gap between the two perspectives. Using the existing tools of blockchain-based transactions, price charts and simple accounting tools, Libra claims to make accounting for bitcoin gains a “four to five clicks” process.

Speaking with CoinDesk, Libra creator Jake Benson said Libra’s methodology is simple. It tracks all transactions to related accounts within the blockchain, then calculates gains on a per-transaction basis. It also determines which capital gains tax best applies to the transaction, the income-tax level of short-term gains or the much lower rate long-term gains.

Then, we output the calculated totals, and direct the user to which box to fill in on which tax form – we may even provide automatic form output for ultimate convenience.”

Benson also noted that his software will be designed to allow integration with mainstream accounting software.

Although Libra is the first notable standalone bitcoin-tax app, it won’t be the last. Given the formulaic nature of tax calculations and the readily available bitcoin transaction details, a flood of new bitcoin apps is expected to flood the market as the April 15 tax deadline approaches. Many expect that Coinbase, BitPay and other mainstream hosted wallet services will have similar tools available this week.

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