How is crypto tax treatment determined?
Multiple independent blockchain data sources parse each transaction in parallel. An AI consensus engine reconciles them, applies 15,000+ verified protocol rules across 80+ chains, and maps the result to one US tax treatment: disposal, income, or non-taxable -- or flags it for review.
Key takeaways
- A hash is decoded into its economic event, mapped to a canonical category, and served with one US treatment: disposal, income, non-taxable, expense, or needs_review.
- Evidence disagreement or a genuinely novel pattern routes to review with the candidate treatment and the evidence, never a silent guess.
- Grey areas expose a documented house default plus the alternative position, configurable per firm.
From raw transaction to treatment
A transaction hash is decoded into its economic event -- what was sent, received, and to whom. The event maps to a canonical category (swap, reward, liquidity, bridge), and the category maps to a treatment under US framing: disposal under IRC §1001, ordinary income under §61 and Rev. Rul. 2023-14, or non-taxable. Every result carries a confidence score and the reasoning.
The honesty rule
When evidence disagrees or a pattern is genuinely novel, the result says so: it ships flagged for professional review with the candidate treatment and the evidence, instead of a guess presented as settled. Grey-area categories -- LP positions, wrapping, liquid staking -- expose a documented house default and the alternative position, configurable per firm.
Where to see it work
The full machine-readable contract is published as a versioned schema, and any transaction can be checked free in the Classification Explorer -- ten a day, no signup.
Frequently asked questions
What is crypto tax classification?
The step between raw on-chain data and a tax return: deciding what each transaction was (swap, reward, transfer, liquidity event) and what that means in US tax terms (a disposal, ordinary income, or no recognition event). Done well it carries a confidence signal and an honest flag when the evidence does not settle the answer.
Can classification software decide my filing position?
No. The engine describes positions and their basis: on contested questions it serves a documented house default with the alternative alongside, and firms configure which applies. The filing position itself belongs to the taxpayer and their preparer; software that silently asserts one is overstepping.
What does the confidence score mean?
It is a corroboration and routing signal, not an accuracy percentage: it reflects how well the available evidence agreed, and it gates one decision, whether the record is served as a treatment or routed to a human. Consumers should act on the needs_review flag and the treatment block, not on integer math against the score.
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This is informational only, not tax advice; verify with a qualified tax professional before filing.