The cryptocurrency market is brimming with hopeful investors looking to make a fortune. However, in addition to the technical know-how, new investors also need to consider the taxation component of crypto. If your country has imposed a tax on crypto, then read along to find some essential information and the best crypto tax software available.
If you are in a country that doesn’t have to worry about capital gains tax for cryptocurrency holders, you may not have to worry about this. However, it would be best to consider doing your research to determine the level of regulation on crypto in your country and whether cryptocurrencies are taxed the way ordinary assets or investments would.
First things first: What is Cryptocurrency tax software?
Cryptocurrency tax software is a kind of computer program that automates the process of handling taxes charged within the crypto market based on your activity with Bitcoin and other coins. In addition, this software has tools to track your crypto portfolio and provide information on your activities across all your exchanges and wallets on one interface.
Best cryptocurrency tax software:
Here are the best crypto tax software to use today.
Koinly is the software that will bring all the simplicity and automation you need for your crypto business. Most crypto investors and experts regard it as the gold standard of crypto tax software. It has practically all the tools required to generate accurate reports and make the most out of your money.
Koinly’s automated trading history importation feature ensures that none of your transactions slips through the cracks. This crypto tax software allows you to import .CSV files or all the trades you carried out through the past year using API keys. Koinly also lets you track changes in the public addresses associated with your cryptocurrency holdings that are held privately.
This software also tracks profits you make from today’s forms of crypto finance, such as borrowing, lending, and staking. Its portfolio tracker should help you identify gains or losses from all your activity throughout the year, thus accurately predicting your capital gains tax for tax season.
You can even use its transaction filtering tool to see what trading activity gave the highest gains. It is one of the unique tax software solutions that will readily connect you to a tax specialist. Koinly offers support for a vast number of popular crypto wallets and exchanges and is operational in multiple countries, including the US.
Its free version will process 10,000 transactions but requires you to pay to export your tax reports. Its tiers start from $49 for up to 100 transactions, $99 for up to 1000 transactions, $179 for up to 3,000 transactions, and $279 for 10,000 transactions and above.
Another terrific option that you can rely on for tracking your capital gains tax from trading in crypto would be Coin Ledger, previously called CryptoTrader.Tax. Like Koinly, it lets you seamlessly import all your crypto exchange activity and generate documents good enough to use for IRS requirements.
Such documents include the IRS 8949 form, international gain/loss reports, and short and long-term sales reports. It has additional functionality that makes it specialized in crypto income, making it an excellent choice for users in Bitcoin and most of the crypto industry.
This software also lets you track crypto that you receive as a gift from forks and airdrops. Its tax-harvesting functionality lets you offset some of the taxes that you may be liable for in a certain financial year.
Coinledger integrates with TaxDirect and TurboTax, 100 crypto exchanges, and all the popular wallets. The software has a free version that allows you to test its calculator, and its premium version has a 100% money-back guarantee.
You can start with the $49/financial year tier called ”Hobbyist” to download your reports. Next up is the $99/year ”Day Trader’Trader’ tier that processes 1500 transactions, followed by the $199/year “High Volume” tier for 5000 transactions, and, finally, the Unlimited Plan for $299/year.
ZenLedger is next up on the list, offering you every tool you need to handle your crypto taxes for this financial year seamlessly. This software will generate all the reports you need to file and obtain and compute your capital gains and losses.
Its Grand Unified Accounting feature, one of its proprietary features, allows you to view all your transactions from different trades and wallets on one spreadsheet. If you have non-crypto tax tasks, ZenLedger can handle them for you. ZenLedger’sZenLedger’s Professional Tax Suite should help you work with your clients if you are a tax professional.
ZenLedger has a free plan that can process 25 transactions. The paid tiers start from ”Starter” ($49/tax year for 100 transactions), followed by Premium ($149/year), Executive ($399/year), and Platinum ($999/year). In addition, this software offers new users a 20% discount and an additional 20% discount for purchasing more than one year’s subscriptions.
TokenTax is yet another excellent crypto tax software solution. It will readily generate the IRS Form 8949, the international gain/loss reports, and a crypto audit trail. It also has tax harvesting, crypto income tax, and margin trading support. TokenTax is unique in this list because it offers crypto tax filing services and a team to assist in such and related tasks. You can therefore bank on TokenTax for excellent customer support.
While TokenTax has no free version, they have a Basic plan ($65 for up to 500 transactions). The higher tiers include Premium ($199/year for 5,000 transactions), Pro ($799/financial year for 20,000 transactions), and VIP ($3,499/year for 30,000 transactions).
If you are more into accuracy and fine detail, then choose CryptoTaxCalculator. This software uses the data you import to generate incredibly detailed calculations and even considers variables such as mining, staking, and ICO participation.
Like any top-tier tax software application, it integrates easily with all popular exchanges. CryptoTaxCalculator is available in the US and Japan, Portugal, Greece, and many other countries.
It has tiered pricing starting from the ”Rookie” plan ($49/year) for 100 transactions. The next plan is ”Hobbyist” ($99/year for 1,000 transactions), followed by ”Investor” ($189/year for 10,000 transactions), and finally, ”Trader” ($299 per tax year for 100,000 transactions).
Most crypto tax software solutions have free versions, but these versions have incredibly limited functionality. To get the most out of them, you will pay anywhere between $50 to several thousand dollars for advanced tax functionalities.
If you are a beginner or simply looking to save a buck, go for Bear.tax. This crypto tax software has a $10/year version that gives you several essential features. With this option, you get 20 transactions plus all of its additional features.
If you buy 2 years of crypto tax accounting, you will get a discount. It is available in countries like the US, Australia, and Canada, but it is not as widespread as Koinly. What’sWhat’s more, Bear.tax has a tax professional on hand that you can obtain assistance from.
This Switzerland-based crypto software is another of the top solutions that is better known for being user-friendly. If you are a beginner, its clean interface, seamless integrations, and intuitive data organization should help you get started easily. Accointing.com also has an excellent, well-organized tax blog with plenty of information and step-by-step guides. Its data importation is also quite straightforward.
Its tax-tracking tools and calculators are fully compliant with IRS requirements for US users and will also be useful for users in Germany, Austria, the UK, Switzerland, and Australia. It also integrates with over 300 exchanges and wallets and has a useful tax-loss harvesting tool.
Its free version processes 25 transactions, while the paid plans start from $79/year for 500 transactions, Trader ($199 for 5,000 transactions), and Pro ($299 for 50,000 transactions). This tax software solution is the best option for beginners in the world of crypto and crypto tax.
Why do you need cryptocurrency tax management software?
You need the software to handle the complicated calculations, rules, and regulations for you. There is a lot of uncertainty regarding how cryptocurrencies like Bitcoin are regulated, let alone taxed. The crypto market is relatively new and regulatory, and taxation agencies haven’t figured out how to handle the gains investors get from dealing in them.
What remains constant is that anyone who sells cryptocurrencies or receives them as payment (not from purchasing them) will likely be liable for taxation. This means that when you use crypto as a means of payment on an online or physical store, you are liable to pay tax.
The right cryptocurrency software should track all this usage for you to ensure things remain automated and seamless. You should not have to spend hours or suffer headaches doing manual cryptocurrency accounting.
Moreover, if the law regarding capital gains tax in your country changes, the software should keep you updated and reflect your changes in your final tax analysis. So, use these software applications to save time and remit the right taxes every year.
What should you know about cryptocurrency taxation law?
The law governing the taxation of crypto depends on the country you are operating in. For better counsel, consider speaking to an accountant or tax specialist in your location. The taxes are calculated based on how long you hold the crypto-asset, which means that your rate can drop even to 0% by holding on to them for a long time. You will have to pay taxes levied on crypto gains like any other investment gains tax.
However, in countries like Germany, Malaysia, Belarus, Malta, Portugal, and Switzerland, it is possible to be levied 0% capital gains tax on your trading gains. These countries may have a law stipulating how long you must have held the asset before you qualify for the 0% capital gains tax.
Other laws stipulate that using crypto as a form of payment for a service or product is like selling the crypto asset, and you are therefore liable for tax.
Which are the best features to look for in a Crypto tax Software?
a) Easy importation of transactions
This feature is most likely the most essential one. The tax software you use should have a simple method for bringing your crypto portfolio and trading activity across all exchanges and wallets into its interface. Importation is probably the only task you will have to do as far as crypto tax determination is concerned, so choose a solution that automates the process as far as possible.
Most crypto tax software applications have a free version that will process a limited number of transactions. However, to get at least 50 transactions, you may have to pay about $50 and more than $200 for unlimited transactions. So look for a software type that can process your number of transactions without breaking your bank account.
The software also tend to have tiered pricing so that you can choose a budget-friendly one. You should know that mining, gifts, transfers, and staking also count as transactions, so consider them while selecting your tier.
c) Customer support
Even outside tax accounting, most software applications can malfunction or seem complicated. A firm with good customer support should help you get started or iron out any issues with the software.
Moreover, taxes, especially those associated with crypto, can be complex, so support would be valuable. While some tax software companies reserve tech support for the higher pricing tiers, there are plenty of others that offer email or live chat for all tiers. Some even offer a tax professional to provide answers, but this kind of consultation will be incredibly costly.
Are crypto tax software applications safe?
Yes, because they are not built for trading or any other activities in which you could lose funds. When using these applications, you do not surrender your crypto assets to a third party. All the software requires is your crypto trading history.
However, remain alert for malicious software. Stick to well-known tax software as some apps can easily gain access to files on your device or trick you into revealing private information. Moreover, be keen while setting up your exchange API keys, as these can be used for trading using third-party apps.
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