Inspiration
We’ve done crypto trading ourselves, and one thing we kept running into was how confusing crypto taxes are. There isn’t a clear, easy way to figure out how much you actually owe, especially when you have a lot of transactions across wallets. We wanted to build a tool that helps users minimize their tax burden by choosing the best cost-basis strategy automatically.
What it does
Our tool takes a wallet’s transaction history and analyzes it to compute taxes under different strategies like FIFO, LIFO, and HIFO. It helps users compare outcomes and choose the method that results in the lowest tax liability.
At a high level, the goal is to minimize: $$ \text{Tax} = \sum (\text{Sell Price} - \text{Cost Basis}) $$
By changing how the cost basis is selected (FIFO vs HIFO, etc.), the total taxable gain can vary significantly.
How we built it
We used Python to build a data parsing pipeline that processes transaction data from crypto wallets. Since different explorers provide data in different formats, we focused on normalizing the data into a consistent structure.
Steps:
- Pulled transaction data from blockchain explorers / CSV exports
- Cleaned and standardized the data
- Classified transactions (send, receive, swap)
- Applied different cost-basis strategies (FIFO, LIFO, HIFO)
- Calculated gains and compared tax outcomes
Challenges we ran into
The biggest challenge was data inconsistency. Different blockchain explorers return transaction data in completely different formats, making it hard to unify everything.
Another issue was that APIs were often incomplete—they didn’t return all the data that was available in CSV downloads. This made it difficult to rely solely on APIs.
It was also challenging to correctly classify transactions, especially swaps, since they often appear as multiple separate transfers instead of a single clear event.
Accomplishments that we're proud of
We were able to build a working pipeline that:
- Parses real crypto transaction data
- Normalizes inconsistent formats
- Applies multiple tax strategies
- Produces meaningful comparisons
Given the limited time, getting end-to-end functionality working was a big win.
What we learned
We learned a lot about crypto taxation, especially how strategies like FIFO, LIFO, and HIFO impact tax outcomes.
On the technical side, we learned how messy real-world blockchain data is and how important data parsing and cleaning are. We also got better at designing systems that can handle incomplete or inconsistent data.
What's next for Crypto Tax Tool
Next, we want to:
- Support more blockchains and wallets
- Build a UI so users can easily upload wallets and view results
- Improve transaction classification (especially swaps and DeFi activity)
- Automatically fetch data directly from the blockchain instead of relying on explorers
- Optimize tax strategies beyond standard FIFO/LIFO/HIFO
Long term, we want this to be a free, reliable tool that anyone in crypto can use to simplify their taxes.
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