If you are curious about how crypto is taxed, you are not alone. Despite the rush to invest in cryptocurrency, tax authorities are still trying to make sense of it. That means you may be asking yourself how best to approach reporting your crypto transactions when April comes around.
Crypto tax tools compared
Wondering what crypto tax software you should be using? Below, you’ll find the best crypto tax software you can use to file your taxes with ease. Keep in mind, most crypto tax software is built with similar features and rarely will you find huge differences when selecting one of the platforms below.
Do you want quick tax returns? CryptoTrader.Tax can automate this whole procedure to the point where you can have your crypto taxes prepared in minutes. The TurboTax integration and tax loss harvesting feature is an additional perk.
While Cryptotrader.tax is on the more expensive side, the 100% money back guarantee may make it worthwhile.
See our Cryptotrader.tax review
CoinTracking.info is a cryptocurrency portfolio manager and tax calculator that links to major cryptocurrency exchanges to obtain your trading history, which is then used to generate tax reports automatically.
Customers don’t have to manually report their cryptocurrency transactions any more, thanks to Acointing.com. Simply link your wallet or exchange account, and the data will be downloaded automatically for you.
They are one of the few that advertise they operate in compliance with the rules of each jurisdiction it serves.
Cointracker is an affordable way to calculate taxable gains, even for users with low numbers of transactions. Bitcoin and all available market digital currencies are supported.
Calculate your potential gains or losses, and estimate your tax liability.
ZenLedger is one of the most popular crypto tax software applications, allowing you to import cryptocurrency transactions, compute gains and income, and automatically fill tax forms.
TaxBIT, like many of the other crypto tax software, aspires to reduce complexity and unify the whole procedure by providing a digital platform that makes every file, document, and report easily accessible.
One of the simplest methods to report your cryptocurrency capital gains and income taxes is through TokenTax.
TokenTax is a crypto tax software platform and cryptocurrency tax accounting firm that automates the calculation of applicable crypto taxes and generates required crypto tax forms.
Koinly is a crypto tax system that allows you to keep track of your cryptocurrency transactions and produce government-compliant tax reports. Koinly makes it easy to link your wallets and track activities such as trading, mining, staking, lending, and airdrops.
Update: Based on a negative recent interaction with this company we are no longer recommending our visitors use their services.
See our Koinly review
It is important to remember that every cryptocurrency investor reports their own situation differently depending on how they acquired or spent these digital assets. While one person’s best practices might work perfectly well for another, there are some best practices which have emerged which most agree upon. This article will touch on a few of those best practices and the best crypto tax software tools that are available for your use at the end.
Tools that are used to report cryptocurrency earnings generally work best when they can import data directly from exchanges or other online services. For best results, you should have records of your coin addresses, your wallet balances and the dates you bought or sold each entry.
If this sounds like a lot of information to track, it is. It is not uncommon for people to lose track of their own transactions or use different wallets for different coins which leads them to reporting inaccurate data in best crypto tax software tools.
The best crypto tax software includes online tools which are used to enter cryptocurrency transaction details then generate reports that can be imported into things like TurboTax or TaxAct.
Do I have to pay taxes on bitcoin?
Since the IRS issued guidance allowing for the taxation of cryptocurrencies, everyone has been asking Do I Have to Pay Taxes on Bitcoin?
Capital gains taxes are a bit more complicated in some countries than others, and there is no one-size-fits-all legislation across the world. These kinds of fees frequently vary based on how long an asset has been owned, and you’ll typically be able to obtain considerably lower (even 0%) rates if you keep bitcoin and other crypto assets for longer.
While you generally have to pay capital gains taxes on crypto-related profits in most countries around the world, there are a few exemptions. Here are some examples of places where it is possible to avoid paying capital gains taxes on your crypto sales:
- Hong Kong
It’s worth noting that a lot of these countries have rules about how long you must keep a cryptocurrency asset before you may benefit from the 0% capital gains tax rate.
Finally, crypto regulation rules surrounding these tax rates may change at any time. It should be mentioned that using bitcoin or other cryptocurrencies to pay for a good or service is considered a sale of the bitcoin currency in many countries, which means it is also an taxable occurrence.
Check with your tax professional if you’re unsure about how much you owe.
How does crypto tax software work?
Crypto tax software makes it easier to calculate, report and pay cryptocurrency taxes. Tax accounting for cryptocurrencies has become a huge concern as more people are getting involved in trading and buying digital currencies . There is no doubt that this will change how crypto traders view their investments going forward since the difficulty of determining taxable income from crypto-related transactions could lead many of them to make less informed decisions about what they invest in.
Is crypto tax software safe?
Yes, generally speaking it’s completely safe when using reputable software.
The best crypto tax software uses highly encrypted connections for secure data transmission. These services also offer a variety of methods that users can use to access their account and upload information needed for taxes . The whole process is pretty simple and user-friendly, which means you can easily log in from anywhere with internet access. If this sounds a little scary to you, a good rule of thumb is to only work with providers who have been around for at least two years or more.
Are There Any Risks Associated With Using Crypto Tax Software?
There are very few risks associated with using cryptocurrency tax software especially when it comes from reputable companies like TurboTax Business, CCH Axcess , TaxAct., Credit Karma, or H&R Block at Home.
The only other risks associated with these services are if you decide to go it alone and try to prepare your cryptocurrency taxes without software. This will likely end up taking a lot more time, which might lead you to making mistakes that could cost you money in the end.
Is crypto tax software free?
No, cryptocurrency tax software isn’t free.
While some of these programs and services offer a free version (for example, TurboTax offers a free edition for simple individual tax returns) most people will need to purchase the premium versions in order to get everything they need from their data.
For most users this shouldn’t be an issue since the price is still significantly lower than what you might pay for offline help with preparing your taxes or if you choose to go it alone and use classic accounting techniques that are more time-consuming and difficult to do correctly.
The best thing about using cryptocurrency tax software is avoiding costly mistakes.
Final thoughts on crypto taxes
Nobody likes paying taxes but having crypto tax software to automate much of the processes can make life a little easier.
Like most things, there is no one best crypto tax software choice. Cryptocurrency taxation is still an evolving process, and what best practices are in place now may change next year. This makes choosing the best crypto tax software a difficult task.
It’s best to use a crypto tax system that lets you import transactions from exchanges or wallets as this will reduce the amount of manual data entry required. You should also select a tool that allows you to easily export data into formats your tax service provider expects so you don’t have to manually enter information into forms.
There are several other crypto tax software programs we came across but we felt any of these you choose above will suit your needs, whether you are an individual or company.
What if you could retire off your crypto investment without paying taxes?
See how you can protect your finances and build wealth with a cryptocurrency IRA.