These days, tech-savvy individuals are always gushing about buying cryptocurrencies. As such, crypto exchanges are also on the rise because traders and investors use them when the market is bearish or bullish or when deciding if they should hold on to their investments a little longer.
Because of crypto’s surging popularity, the government decided to step in and impose taxes on these digital assets. Thus, there has been a rising need for crypto tax software, especially since mandatory crypto tax reporting will officially be in effect by 2023.
The crypto space is constantly changing, and so many new things get introduced almost daily, so it can be challenging to keep track of taxation-related things. Although having a crypto portfolio tracker can help, keeping track of all your crypto-related transactions can pose a real challenge, especially if you’re also using mining software.
As such, we’ve decided to make an extensive article about the best crypto tax software available to help you make an informed decision, along with other helpful tips and factors to consider that can make your search that much easier.
What Exactly Is Crypto Tax Software?
As its name implies, cryptocurrency tax software is a digital tool that helps calculate how much taxes you or a company owes on crypto-related transactions and investments. This software makes your life so much easier because it can quickly import all your data from your wallets and exchanges like OKX. Not only that, it can even generate tax reports so that you don’t have to.
As the value of these digital assets increases, the need for crypto tax software also increases with it. Paying your taxes is not only a tedious process, but it can also get confusing for some, which is why this handy tool helps you stay organized by calculating the right amount you need to pay.
Besides, creating tax-related documents and reports yourself can be a huge hassle, not to mention that it takes up a lot of time. There’s a lot of crypto tax software out there, so much so that it can get overwhelming. So, it’s crucial to do extensive research beforehand to ensure you’re choosing one that meets all your needs.
Why Should You Use One?
If you’re still on the fence about using crypto tax software, here are some reasons why you should:
Helps You Become More Organized
As mentioned, organizing and keeping track of all your crypto transactions can be challenging, especially if your portfolio is quite extensive. However, this digital tool can make the entire process significantly more manageable because it can track your coins and import your data from wallets and exchanges.
By importing your data, you’ll see a thorough breakdown of your portfolio, seeing which coins performed well over time. Tax professionals typically use advanced crypto tax software because the process can be complex. However, crypto tax software is now available for beginners or non-professionals to quickly and conveniently file their taxes correctly.
Specially Designed and Optimized for Crypto Users
Since tax reporting for crypto-related investments and transactions is relatively new, most providers developed specific tax software for this niche. These handy tools can fit your exact needs, and you may even have the chance to receive extra deductions if you’re qualified.
If you choose not to use these tools, there’s a chance you’ll miss these deductions because they’re not obvious, and you might end up paying more than you need to.
Filing Your Taxes Become Much Easier
As mentioned, filing your taxes can be a hassle, not to mention confusing and time-consuming. This is especially the case for those who are new to crypto. However, with cryptocurrency tax software, you can rely on this tool to do most of the work for you, including generating tax reports, tracking costs, importing data, and more. By the end of it, you’ll feel less stressed, and you’ll find that you now have a lot of extra time on your hands.
Ensures You’re Paying the Right Amount of Taxes
If you want to avoid getting penalized by the IRS, you must create the correct tax report. Fortunately, crypto tax software can do the job for you, allowing you to file your taxes quickly and more conveniently.
Top 5 Crypto Tax Software
Without further ado, we’ve listed below some of the best crypto tax software in the market. Check each one out thoroughly to ensure it has all the features you need before making a final decision.
Koinly calculates your crypto taxes and helps you find ways to reduce them for the following year. With Koinly, you can rest assured that you’ll be able to do your taxes correctly, thanks to its wide range of reliable features and import mechanisms. If you’ve tried trading crypto before but no records are available, you’ll undoubtedly appreciate Koinly’s accounting services.
This tool can save you so much time, especially since it can automatically import your data no matter what coin or token. Koinly can also help you manage your transactions and keep all the needed information in one place. It’s a versatile tool that supports online wallets and crypto exchanges for faster importing in API and CSV.
If you’re looking for a comprehensive option to help you with your crypto taxes, Koinly is a fantastic option to consider.
- Whether you’re filing by yourself or working alongside an accountant, you can still benefit from Koinly, as it can quickly generate the crypto tax reports you need to make your filing experience easier.
- Koinly keeps track of your transaction history to monitor your expenses and to see if any of your previous transactions were fraudulent. Since the software uses AI, it will immediately notify you if it flags anything suspicious.
- You can also use Koinly to see how much you’ve made or lost during a tax year, allowing you to see the performance of your portfolio quickly.
Koinly is free of charge, and you don’t need a credit card to start using it.
TokenTax is many things: it’s a tax software provider, a full-service crypto accounting firm, and a crypto payment processor. If you want something that can automate the entire tax filing process, this is the tool for you. TokenTax has an expansive list of products and services that can make your life so much easier when tax season comes around, as it can calculate, report, and track your crypto taxes for you.
What’s more, it’s the only crypto tax calculator that supports most, if not all, cryptocurrency exchanges. It can import your data no matter where the source is, making it an efficient medium for calculating your capital gains.
- It’s so much easier to file your crypto taxes because it has a feature that automatically fills out Form 8949 for you according to your crypto trading history.
- It’s also ideal for companies that don’t have sufficient resources to handle the requirements and complexities of tax regulations, as TokenTax offers a full-service solution.
- It has automatic API import to quickly link leading crypto exchanges like BitMex, Coinbase, Binance, and more.
Unfortunately, TokenTax isn’t free, but it does offer different pricing options for you to choose from. The Basic plan costs $65 per tax year, the Premium plan costs $199 per tax year, and the Pro plan costs $799 per tax year.
If you’re not a veteran at processing crypto taxes and you want to simplify it as much as you can, then you may want to check out ZenLedger. This crypto tax software offers one-click integrations for wallets and exchanges, which means you can stay within ZenLedger yet still finish all the work you need to do.
ZenLedger helps track your crypto transactions, assess how much profit you’ve made, and ensure that you don’t pay extra when filing your taxes. The platform regularly introduces new additions and integrations because it wants to be a complete service that users can rely on. Thanks to the level of flexibility that ZenLedger offers, you are free to choose any wallet provider or crypto exchange platform to ensure that you’re in complete control of your tax responsibilities.
- ZenLedger has incredibly competitive prices compared to similar software. It even offers a free tier to users along with regular software updates.
- You can choose any wallet provider or exchange you want, so you’re more comfortable using the software.
- Its customer service team is available seven days a week, and you can contact them either by chat, email, or phone.
- It uses the latest security technologies to ensure that your data is secure.
As mentioned, ZenLedger has a free plan that allows you a maximum of 25 transactions. As for its paid plans, the Starter plan costs $49 a year, Premium costs $149 a year, and Executive costs $399 a year.
TaxBit functions as a bridge between tax authorities and crypto users by offering users a simple way to file taxes. TaxBit ensures that you file your taxes correctly and securely so that you won’t incur any penalties for any mistakes. TaxBit makes the entire tax filing process much more streamlined for its users, and it comes with features that will undoubtedly come in handy no matter what type of user you are.
You can also easily incorporate APIs into your site so that the platform automatically imports data. This allows for quicker filings and significantly less work for you.
- The platform’s API supports most crypto exchanges out there, which means you don’t need to use any other API for your tax concerns.
- You’ll get a real-time representation of all your crypto transactions across various platforms, which ultimately saves you a lot of time. Not only that, it helps minimize or prevent any mistakes.
- Many reliable exchanges partner with TaxBit, which shows that you can trust this software.
- You can rest assured that your data is secure, thanks to it being SOC 2-certified by independent auditors.
TaxBit comes with a free trial, but other than that, the Basic plan costs $50 a year for 250 transactions, the Premium plan costs $175 a year for 2500 transactions, and the Pro plan costs $500 a year for 25000 transactions.
With Cointracker, you can modify your cost basis and optimize your accounting methods with the tax code. In other words, you can quickly increase your profits over time. By having better visibility into your portfolio and tax lots, you’ll be able to make more informed decisions when trading. And with the help of Cointracker, you can learn from the data it provides to reduce your tax liability drastically.
Cointracker’s customer support is top-notch as well, so you can always get the help you need at all times. You can contact their team for any questions or concerns via email or phone, and you should receive a quick response.
The software allows you to view essential data in real-time, such as your investment performance, portfolio allocation, market value, and others. It updates this information with every change that occurs, allowing you to make informed and up-to-date decisions.
- You can review your crypto transactions in a calendar format, allowing you to find and view transactions quickly.
- It can import your data from various wallets and exchanges.
- Save time by combining your trades into different tax lots, depending on their tax codes. This way, you don’t have to track every transaction.
If you don’t want to pay for using Cointracker, the software offers a basic package available for free. However, this package can only support up to 25 transactions. If transactions exceed that figure, its Hobbyist plan costs $53, the Premium plan costs $179, and the Unlimited plan has individual prices depending on your needs.
Factors to Consider When Selecting a Crypto Tax Software
As you can see, there’s a wide array of crypto tax software available, with varying features and capabilities. As such, it can be confusing at first, especially if you’re new to filing crypto taxes. You must consider several factors to help ensure you’re selecting the right software for your needs.
Supports Your Exchange Platform
Crypto exchanges typically don’t report transactions directly to the IRS, which is why users must fill out Form 8949 whenever they trade. If you’re the type of trader who transacts on different exchanges, you’ll want tax software that automatically imports all the data from these different platforms. It can significantly simplify the overall process while saving you time.
How Often You’ll Use It
Cryptocurrency tax software is typically developed for either short-term or long-term use. However, when choosing the best software for you, you need to consider how often you plan on filing crypto taxes. If you do so regularly, it makes sense for you to choose a tool that already has all the necessary features you’ll need.
However, if you don’t think you’ll be filing your taxes in a while, you probably don’t need all the features from the get-go.
Pricing is another thing you’ll need to think about thoroughly. Tax software varies in price, so you must look for one that fits your budget yet has all the features you need.
Can Track Your Coins
Various coins typically have different tax rules, and there’s no one-rule-fits-all concept here. So, it would be best to choose a tax software capable of tracking different types of transactions and can correctly calculate the cost basis. Some software providers have tools for specific coins, while others are more general.
Can Accurately Import Data
When selecting the best crypto tax software for your needs, it’s vital to choose a tool that can accurately and quickly import data from different sources. This way, you can rest easy knowing your transactions and records are updated and correct.
Secure Backup System
Finally, you must choose a tool that has a secure backup system. As you know, documents related to tax concerns are a private and sensitive matter, so the software you choose must be able to backup your essential records if your laptop or computer breaks.
Now, it’s time to wrap things up. Filing crypto taxes is undoubtedly a complex process, and you’ll need all the help you can get to make things easier. As time passes, newer and better software will appear; that’s why you must keep in mind our list of factors to consider so that you’ll always choose the right tool that meets all your needs.