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Navigating tax obligations with the IRS during tax season can become complex if you’ve engaged in extensive cryptocurrency trading. Compared to stockbrokers, cryptocurrency exchanges sometimes have the responsibility to submit annual tax forms summarizing your activity. Therefore, it falls upon you to determine your net earnings for the previous year and understand how it impacts your taxes.
To simplify this process, several software companies have developed products in recent years specifically designed to assist investors and traders with filing taxes for Bitcoin and other cryptocurrencies. These programs use data from your exchange account to compile comprehensive records of both profits and losses. Using crypto tax software[1], you can generate an IRS Form 8949 based on these records.
Note that this document differs from what a traditional stockbroker might provide, focusing solely on reporting capital asset sales rather than equities sales over the past year.
10 Best Crypto Tax Software
●Koinly – Best Crypto Tax Software Overall
●ZenLedger – Best for Accounting Features
●TokenTax – Best for Fully Automated Crypto Tax Reporting
●TurboTax – Best for Ease of Use
●TaxSlayer– Best for Expert Tax Assistance
●H&R Block– Best for Beginners
●TaxAct – Best for Customer Support
●TaxBit – Best for Unlimited Transactions
●CoinLedger – Best for Frequent Traders
●Coinpanda – Best for Exchange Integrations
Koinly– Best Crypto Tax Software Overall
Established in 2018, Koinlysimplifies the process of crypto tax reporting, even if you have no prior record of your transactions. With support for over 400 crypto exchanges, including Binance, Coinbase, Crypto.com, and KuCoin, Koinly makes it effortless to extract your crypto exchange history through a secure API connection.
By utilizing a read-only mode when accessing your data, Koinly ensures that no modifications can be made to your account. Koinly is compatible with top-notch crypto wallets such as MetaMask Ledger Trust Wallet and Electrum. This means that wallet-to-wallet transactions are taken into consideration during tax calculations.
One of Koinly’s standout features is its access to more than a decade of cryptocurrency prices. This guarantees precise cost-price calculations. Before using the platform, it’s essential to check if your country of residence is supported since they cater to over 20 countries, including the US, Canada, UK, and various EU member states. By aligning with correct reporting standards for taxes, users can know their calculations are accurate.
Koinly provides a complementary plan that imposes a cap of 10,000 transactions on its users. This plan doesn’t encompass tax reports, necessitating individuals to handle their own filing. As this feature holds significant importance, consider one of Koinly’s paid plans. These plans are priced at $49, $99, and $179 per year based on transaction volumes of 100, 1,000, and 10,000, respectively.
Pros
●Compatible with numerous exchanges and wallets
●Accessible in over 20 countries, ensuring compliance with local tax regulations
●Tax calculations were completed in just 20 minutes
●Supports tax harvesting
Cons
●The free plan doesn’t incorporate cryptocurrency tax reporting
ZenLedger– Best for Accounting Features
ZenLedger, a widely used crypto tax software, manages DeFi portfolios. Over the years, ZenLedger has successfully monitored over 50 billion transactions for its extensive client base of over 100,000 individuals. Specifically designed for investors who frequently use DeFi income tools like staking and yield farming, ZenLedger streamlines the process of calculating taxes.
By meticulously tracking the cost price of tokenized rewards upon receipt, ZenLedger simplifies tax calculations. It lets users monitor capital gains and losses incurred on various DeFi platforms. The software integrates with over 400 decentralized platforms, such as 1Inch, Aave, Uniswap, and PancakeSwap.
What sets ZenLedger apart is its comprehensive coverage across over 50 blockchain standards. This ensures that your entire DeFi portfolio is accounted for when filing yearly taxes. The platform offers a free plan that allows users to track up to 25 transactions; however, this plan doesn’t include DeFi integration functionality.
To access this feature, you must subscribe to their annual subscription, which costs $149.This subscription includes full tax reporting capabilities along with the ability to track up to 5,000 transactions
Pros:
●Optimal crypto tax software for managing DeFi earnings
●Compatibility with over 400 exchanges and 100 DeFi protocols
●Rapid generation of tax reports
●Premium support accessible to seven days a week
Cons:
●Full DeFi integration necessitates a minimum purchase of $149
TokenTax– Best for Fully Automated Crypto Tax Reporting
TokenTaxstands out as the leading cryptocurrency tax software for clients in the United States. This software not only extracts and analyzes transactions but also handles the submission of the relevant tax form to the Internal Revenue Service (IRS). Once your report is generated, TokenTax conveniently fills in Form 8949.
Besides crypto transactions, you can include other capital disposals made throughout the year, such as investing in stocks or ETFs. Alternatively, if your investment portfolio solely consists of cryptos, you can directly forward Form 8949 to the IRS. TokenTax software is compatible with any country and currency. However, non-US clients will only receive their crypto tax report and will need to complete their own forms accordingly.
TokenTax is compatible with over 100 external platforms, enabling users to import crypto transactions through an API. This wide range includes popular crypto exchanges like BitMart, Binance, Bitfinex, and Kraken. It supports leading crypto wallets and decentralized exchanges. TokenTax goes beyond that by extending its support to NFT marketplaces such as OpenSea.
When considering fees, we discovered that TokenTax may be pricier than other providers. To illustrate this point further: the least expensive plan is priced at $65 per year and solely provides access to a Coinbase API. One must subscribe for $199 to access additional exchanges and wallets. A professional trader plan with a price tag of $1,599 is also available.
Pros:
●Compatible with all countries and currencies
●US clients can effortlessly complete their Form 8949
●Supports exchanges, wallets, and NFT marketplaces
●Allows upload of CSV files for platforms not directly supported
Cons:
●No provision of free crypto tax software
●The $65 plan exclusively supports Coinbase APIs
TurboTax– Best for Ease of Use
TurboTaxCrypto is a popular tax preparation software offered by one of the leading companies in the industry. It caters to individuals looking to report their cryptocurrency transactions and is a reliable option for those with complex tax situations.
One of the standout features of TurboTax Crypto is its user-friendly interface, which includes helpful tooltips, an easy-to-navigate system, and frequently asked questions. The software offers exceptional customer support services. However, its capability to integrate with third-party crypto accounts sets TurboTax Crypto apart from other options. This feature allows users to seamlessly import their crypto sales data into the program for precise and accurate tax filing.
Similarly to other TurboTax products, TurboTax Crypto provides access to tax experts if needed. However, it’s important to note that this additional service may cost extra.
It’s worth mentioning that among all the cryptocurrency tax products we evaluated, TurboTax Crypto stands out as it offers users the convenience of filing their full tax returns directly through its platform.
Pros:
●Enables direct importation of your crypto sales into the software
●The sole crypto tax product providing comprehensive filing of your tax return
Cons:
●It’s not a standalone product, exclusively accessible to individuals filing taxes via TurboTax
TaxSlayer– Best for Expert Tax Assistance
TaxSlayer simplifies filing a tax return for individuals who prefer minimal help. Suppose you’re aware of the specific sources of income that require reporting and the deductions and credits available to you. In that case, there’s no need to navigate through many unnecessary interview screens. Instead, you can directly access the sections relevant to your needs.
However, TaxSlayer software questions are designed to guide you through the sections about your unique tax situation. There’s an option to upgrade to a higher-priced package to receive assistance from a professional tax advisor.
Pros:
●Offers one of the most affordable options for filing complex tax situations
●Active-duty military personnel can file federal tax returns free of charge
●Provides personalized tax guidance
●Allows free filing of student loan interest and education credits
Cons:
●Lack of synchronization with banks and brokerage accounts
●The Simply Free tier doesn’t support dependent tax credits
●Navigation may be more challenging compared to more expensive services
●Tax experts don’t prepare or review your return
H&R Block– Best for Beginners
H&R Block’s Crypto Tax Software stands out with its impressive features that aim to simplify filing taxes for cryptocurrency. It offers integration options for over 300 popular exchanges and wallets, allowing users to import and reconcile transaction histories effortlessly. This helps minimize errors that may arise from manual data entry.
The platform provides comprehensive customer support through live chat, phone assistance, in-person appointments, and a knowledge base.
By leveraging advanced algorithms, the software ensures accurate tax reporting by considering the latest guidelines from the IRS and relevant tax laws. H&R Block also offers flexible pricing plans (Basic, Deluxe, and Premium) tailored to suit different transaction volumes. To provide a risk-free experience for users, each plan comes with a money-back guarantee.
The H&R Block Crypto Tax Software is designed to simplify crypto tax filing and ensure accuracy and regulation compliance. With its extensive integration options and customer support channels paired with reliable algorithms and competitive pricing plans, it sets itself apart from other solutions in the market.
Pros:
●Superb user experience with intuitive navigation
●Context-sensitive assistance available
●Comprehensive and easily understandable explanations of tax concepts
●Exceptional mobile applications
●Optional fee-based assistance from experts
Cons:
●Occasionally experiences slow loading times
●Some instances may require excessive clicking
TaxAct– Best for Customer Support
TaxAct is the ideal choice for individuals who prefer not to spend money on top-tier software like H&R Block or TurboTax but will invest in a high-quality and user-friendly interface for filing their own taxes.
Those who are self-sufficient and require little assistance will find TaxAct’s software most beneficial. However, all TaxAct’s plans now include free access to experts who can guide the filing process, which was introduced as a bonus last year. There’s also an option available to upgrade and have a professional handle the tax filing on your behalf.
Pros:
●Seamless transition between sections without redundant interview questions
●Complimentary support from CPAs, enrolled agents (EAs), and tax attorneys available to all users
●Capability to import an electronic copy of your W-2 into the software
Cons:
●State return fees are comparatively higher than those of competitors
●Frequent prompts to upgrade or purchase additional services
●Ability to file using the mobile app is restricted to users who meet specific criteria
TaxBit– Best for Unlimited Transactions
Established in the year 2018, TaxBitplaces a significant emphasis on the United States. However, individuals subjected to a comparable tax system can also utilize its services.
In a recent move, TaxBit altered its business strategy by reducing the number of offered features. Nonetheless, it remains completely free and supports an unlimited quantity of transactions.
TaxBit’s crypto tax software provides comprehensive integration with specific cryptocurrency exchanges. It offers self-service integration options for various blockchains and wallets. Note that TaxBit doesn’t offer customer support services.
Pros:
●Outstanding value proposition
●Integration with most major exchanges
●Suitable for both individuals and institutions
●Free services are available to both individuals and institutions
●Provides comprehensive tax calculations
Cons:
●Generates only Form 8949. TaxBit’s tax report solely consists of Form 8949, requiring users to complete other IRS tax documents, such as Schedule D
●Absence of a mobile application
CoinLedger– Best for Frequent Traders
CoinLedger, a widely used cryptocurrency tax software, has successfully catered to over 400,000 clients. Generating comprehensive tax reports with CoinLedger is as easy as following three simple steps. First and foremost, you must connect your exchange and wallet data.
Once connected, CoinLedger will swiftly analyze your transactions and provide you with a draft report for review. Upon confirming the accuracy of the information presented in the draft report, CoinLedger will generate a final report outlining your tax obligations for the corresponding year.
CoinLedger supports an impressive array of over 100 platform integrations. This includes renowned crypto exchanges such as Kraken, Binance, Gemini, and KuCoin. However, CoinLedger’s compatibility extends to only nine specific crypto wallets: MetaMask, Trust Wallet, Ledger, Exodus, Abra, Jaxx, Trezor MyEthreumWallet, and Zengo.
While CoinLedger has a free plan, it doesn’t include tax reporting features. To access such features, paid plans are offered at a one-time payment basis calculated depending on the total number of crypto transactions made by a user.
Pros:
●Streamlined three-step process for calculating crypto taxes annually
●Integration with crypto exchanges, wallets, and DeFi platforms
●Trusted by over 400,000 customers
●Additionally supports NFTs
Cons:
●The $199 option provides coverage for up to 3,000 transactions only
Coinpanda– Best for Exchange Integrations
Coinpandapresents itself as a favorable choice for traders who are involved in leveraged cryptocurrency products. This advanced tax software caters to margin accounts, leveraged tokens, and various crypto derivatives such as options and futures. Calculating crypto taxes[2] on these investment products can be challenging due to the numerous variables involved.
What sets Coinpanda apart is its ability to consider the opening and closing prices of your leveraged trades and factors like financing fees and commissions. It boasts compatibility with over 500 exchanges, including popular ones like Binance, ByBit, Kucoin, and BitMEX. It extends its support to encompass DeFi platforms like Algorand and Uniswap, along with over 115 wallets.
With Coinpanda’s compatibility spanning across 242 blockchain standards, virtually all cryptocurrencies are accounted for. Another compelling feature is its comprehensive tax reporting capabilities for more than 65 countries worldwide, encompassing key regions such as the US, UK, and Europe. The pricing structure varies based on transaction volume requirements, ranging from $0 for up to 25 transactions up to $189 for handling up to 3,000 transactions, respectively.
Pros:
●Leading crypto tax software for monitoring leveraged positions
●Compatible with over 65 countries
●Trustpilot rating of 4.6 out of 5
●Crypto tax reports were generated in less than 20 minutes
Cons:
●The $189 plan restricts users to 3,000 transactions
●Portfolios exceeding 20,000 transactions require a custom quote
Our Ranking Methodology for the Best Crypto Tax Software
Before selecting the top cryptocurrency tax software for American investors, we thoroughly analyzed various factors. During our evaluation of each platform, we considered several aspects:
●Price Comparison: We conducted a thorough evaluation of the pricing plans offered by various crypto tax software providers, analyzing the features and value provided for the cost. Our assessment aimed not only to identify the most cost-effective options for different types of cryptocurrency investors and traders but also to pinpoint plans offering the best value overall.
●Supported Exchange Integration: We scrutinized the extent of exchange, wallet, blockchain, and coin tracking service integrations available with each provider. This assessment facilitates the seamless importation of all cryptocurrency transaction data through API keys or CSV files.
●User-Friendliness: Our comparison involved evaluating the user-friendliness of different crypto tax software solutions. From the ease of sign-up to the simplicity of importing transaction data and generating tax reports, we identified programs that streamline the entire process from start to finish.
●Inclusive Tax Forms and Reports: While all crypto tax software generates IRS Form 8949 to report capital gains and losses from crypto investments, we also considered the availability of additional tax forms, such as Schedule C and Schedule 1, depending on users’ crypto activities.
●Accessibility for Accountants:Once tax reports are generated, we assessed the ease of granting accountants access to the tax report and exporting data to popular tax filing software.
●Customer Support: Finally, we examined the accessibility of customer support teams offered by software providers, analyzing user feedback on customer support quality and evaluating online help resources’ availability.
Best Crypto Tax Software – Buyer’s Guide
What Is Crypto Tax Software?
Crypto tax software is a valuable tool that lets you meticulously document your crypto transactions and accurately calculate the capital gain or loss incurred when your crypto assets are sold, exchanged, given away, or traded.
The top-notch crypto software seamlessly integrates with your preferred exchange platform for efficient cryptocurrency management. It effortlessly captures and records your transactions’ pertinent details as soon as an exchange or trade is executed.
In addition to automatic data capturing, most crypto tax software also offers the flexibility to import your transactional data manually. This can be done by exporting the relevant information from your chosen crypto exchange platform in CSV format and subsequently importing it into the desired crypto tax software.
These comprehensive programs keep meticulous track of all transactions and ensure that they align with IRS forms and US tax reporting requirements. With their ability to automatically populate tax forms at year-end, these software solutions guarantee accurate calculation and payment of taxes by US cryptocurrency tax regulations.
Why Use Crypto Tax Software?
Using crypto tax software can streamline organizing and filing tax documents for your cryptocurrency investments. Discover the benefits that come with utilizing this type of software.
●Time-saving: Most software streamlines crypto record-keeping by integrating seamlessly with your crypto exchange.
●Assistance with complex tax regulations: Tax regulations about crypto assets can be intricate. Crypto tax software aids in ensuring accurate tax payments each year, mitigating the risk of unpleasant surprises.
●Tax form generation:Most crypto tax software assists in completing year-end tax forms, eliminating the need for specialized accountant services.
●Profit protection:Leading crypto tax software employs strategies to minimize your tax liability. For instance, you may aggregate similar crypto assets to offset gains and losses.
●Reduced risk of penalties: Given the complexity of US tax regulations, there’s a substantial risk of inaccurately reporting crypto asset information on your tax return without specialized software. Utilizing such software helps mitigate this risk.
How Does Crypto Tax Software Work?
Due to the distinctive characteristics of cryptocurrency, it’s challenging to monitor your profits, losses, and earnings from various exchanges and wallets. Creating a manual spreadsheet to document your cryptocurrency transactions requires significant time and dedication.
Fortunately, crypto tax software is available to save you considerable time and energy. Simply link your wallets and exchanges, import your transactions, and generate a comprehensive tax report that includes your financial activities. This software streamlines the process while ensuring reporting accuracy.
How to Find the Best Crypto Tax Software to Suit Your Needs
Each of the aforementioned crypto tax software options has its own set of advantages and disadvantages. In the following paragraphs, we will outline our research approach for ranking the top providers.
Continue reading to find the ideal crypto tax software that meets your specific needs and budgetary constraints.
Supported Countries
Before delving into features, pricing, and other metrics, confirm that your tax residency is accommodated. This step is crucial because crypto tax regulations differ from one country to another.
Each country has specific guidelines for tax reporting, including calculating cryptocurrency cost prices. Your country of residence may offer distinct advantages regarding taxes, such as capital gains allowances.
●For instance, in the UK, residents aren’t required to pay taxes on capital gains below £6,000 for the 2023/24 tax year, with this threshold reducing to £3,000 in 2024/25.
●In Australia, crypto assets held for over 12 months enjoy a 50% reduction in capital gains tax.
●Similarly, US traders benefit from holding onto their crypto for over 12 months. As per the IRS, long-term capital gains rates apply, ranging from 0%, 15%, or 20%. Conversely, short-term capital gains, referring to holdings of less than 12 months, are taxed at ordinary tax rates.
Here are some crypto tax statistics to consider. The main idea is that you won’t get personalized service if the software provider doesn’t support your country of residence. Instead, you’ll only receive a general overview of your annual profit and loss. This could result in paying more taxes than necessary.
Platform Integration
Now let’s move on to evaluating the compatibility of the crypto tax software with different platforms. When we say “integrate,” we’re referring to how the software connects to your exchanges and wallets through an Application Programming Interface (API). This integration allows for a completely automated process, eliminating the need for manual transaction input.
With this feature, the crypto tax software can import all of your past trades and wallet transfers. What’s even more impressive is its ability to determine when each transaction occurred, enabling it to assign an appropriate cost basis. However, if one of your exchange or wallet providers isn’t supported by the software, the reporting process can be cumbersome.
If you plan to transfer your transactions, you will probably need to use a file format called comma-separated values (CSV). By exporting your data into this type of file, you can easily upload it into the crypto tax software. Not all software providers allow for manual CSV uploads. Therefore, before proceeding with this method, be sure to verify if your chosen provider supports this feature.
Tax Form Automation
To ensure a smooth and hassle-free experience, opt for a provider that offers integration of tax forms. In simpler terms, this means that the provider will fill out your tax form for you, enabling you to submit it to your local tax authority directly.
If you’re located in the United States, the relevant form would be IRS Form 8949. This form is used to report asset disposals during the tax year. It requires information such as the asset’s name, dates of purchase and sale, costs and disposal prices, and total gains or losses incurred. If you have conducted numerous cryptocurrency trades, manually inputting all this data into the form can be an extremely time-consuming task.
Support for DeFi Income
There are two types of crypto taxes. The first type is capital gains, which refers to the profit obtained from buying and selling cryptocurrencies. All crypto tax software can calculate capital gains. The second type of tax applies to DeFi income tools like staking and yield farming.
If you have used any of these tools before, it’s essential that your crypto tax software can handle them. This is because tax authorities consider DeFi rewards as income, meaning you need to pay taxes on them regardless of whether you use or dispose of them.
●Let’s say you have accounts with leading crypto-staking platforms.
●On the first day, you receive 0.1 ETH in staking rewards when ETH is valued at $1,500. Consequently, you’re required to report this cost price in your tax documentation.
●On the second day, you receive an additional 0.1 ETH when ETH is priced at $1,600. Once again, reporting this cost price when completing your tax form is necessary.
Luckily, top-notch cryptocurrency tax software can handle the task on your behalf. It can automatically compute the original value of all DeFi rewards when they were acquired. If the service provider extends comprehensive assistance tailored to your country of residence, it will employ an appropriate accounting method (such as FIFO or LIFO).
Tax Loss Harvesting
For an entirely new piece of content, we recommend selecting crypto tax software that supports tax loss harvesting. This feature enables you to avoid crypto taxes under your country’s reporting regulations legally.
If you’re unfamiliar with tax loss harvesting, here’s a brief explanation of how it functions:
●The crypto tax software scrutinizes all your transactions throughout the year and assesses your existing portfolio.
●The software determines that your current capital gains amount to $10,000.
●However, you currently hold $7,000 worth of Bitcoin, which you initially acquired for $14,000.
●Should you decide to sell the Bitcoin, you would incur a $7,000 loss on the trade.
●This $7,000 loss can offset your $10,000 capital gains, resulting in your owing only $3,000.
Depending on your location, you can repurchase the cryptocurrencies you sold for tax loss harvesting purposes. This implies that while you still maintain exposure to the cryptocurrencies, you have effectively locked in the capital loss for this particular year.
Regarding traditional stock trading in the United States, investors must exercise caution when abiding by the ‘wash sale rule.’ This rule prevents investors from selling securities to get tax benefits and subsequently repurchasing them within a 30-day timeframe. However, CNBC says this wash sale rule doesn’t apply to cryptocurrencies.
Therefore, it’s prudent to opt for crypto tax software that can recommend how to legally minimize or even eliminate your taxes for a given year. These advantageous opportunities may go unnoticed if relying solely on manual transaction analysis.
Pricing
In most instances, we discovered that crypto tax software platforms impose fees based on the number of transactions you wish to examine. This payment structure is equitable since it ensures you only pay for the specific services you require.
Nonetheless, certain providers offer restricted capabilities with their lower-priced plans. For instance, free plans may include coverage for up to 25 transactions but need localized tax reports. In certain scenarios, free plans only provide limited exchange integration and other essential features.
Best Crypto Tax Software – Frequently Asked Questions
How Do I Keep Track of Crypto Taxes?
Track your cryptocurrency transactions and generate tax reports using crypto tax software. It’s advisable to manually monitor your crypto transactions to allow for adjustments in case the software produces inaccurate reports due to incorrect uploads.
What Is the Best Way to File Crypto Taxes?
Initially, acquire knowledge on how to document your cryptocurrency taxes. After accomplishing this task, you might utilize crypto tax software to generate your tax reports, particularly if the number of transactions exceeds 100.
Is Crypto Tax Software Free?
Many crypto tax software options offer free features, but they often require payment to generate tax reports. Take Koinly as an example. It allows tracking up to 10,000 transactions without charge, but producing tax reports is free.
Final Thoughts
Engaging in cryptocurrency investments involves numerous transactions across various wallets and exchanges. To simplify creating error-free and seamless tax reports, we have outlined five of the most noteworthy options available.
With many crypto tax software tools on the market, selecting one can be perplexing. We aim to provide you with an overview of these options to facilitate your decision-making.
As previously mentioned, each crypto tax software has its own advantages and disadvantages. Some platforms offer comprehensive forms, while others specialize in tax-loss harvesting. Price discrepancies also play a role in influencing your choice.
The news and editorial staff of the Santa Cruz Sentinel had no role in this post’s preparation. This is a paid advertisem*nt and does not necessarily reflect the official policy or position of the Santa Cruz Sentinel, its employees, or subsidiaries.
