I know ‘Tax’ is not your favorite subject and neither of mine.
But Benjamin Franklin said:
In this world, nothing can be said to be certain, except death and taxes
And I believe you agree with him.
But whether you agree or disagree taxes are a reality and in almost every country on this planet, we need to comply with the taxmen.
Cryptocurrencies are no different, and you have to pay some or other sort of tax on buying or selling of cryptocurrencies.
This is more so in developed countries like the US, UK, Canada, Australia, etc. where most of the cryptocurrency users like you reside.
You might have realized by now how cumbersome and challenging the process is to calculate and file your cryptocurrency taxes.
So many coins to take care, n-number of trades made in the last financial year and number of crypto trading accounts on various cryptocurrency exchanges only make the matter more complicated.
So without further beating around the bush, I urge you to look at some of the best crypto tax softwares that we have listed below:
Top Cryptocurrency/Bitcoin Tax Softwares
There are both free and paid bitcoin tax softwares/tools available in the market.
But for this guide, I will touch only upon paid crypto tax softwares because no one would want to get in trouble later due to seen/unseen mistakes committed by free softwares.
CryptoTrader is a smart taxation software that lets you calculate your crypto income and crypto taxes painlessly. They are doing crypto taxation since 2017- the holly great bull run of Bitcoin.
This is an automation software where you can prepare your cryptocurrency taxes yourself using the same methods which professional use (like FIFO, LIFO, etc.).
The best part is, CryptoTrade goes through your trade level date to accurately calculate the right amount of taxes you owe to the IRS (or any tax authority).
It gets better:
You can now integrate CryptoTrader software with 25 cryptocurrency and bitcoin exchanges using their APIs which I think is the most number of crypto exchanges supported by tax software.
Lastly, you get all sorts of autogenerated reports such as cryptocurrency income report, short & long term sales report, IRS Form 8949, Audit trail report, End of Year positions report, TurboTax online direct import, etc.
#2. Token Tax
Token Tax software is another easy and reliable way to do your cryptocurrency taxes to dodge the taxmen.
They have a reliable team based out of the US who has been doing this for crypto lovers like you since 2017. So whether you are based out of the US, UK or Japan, Token Tax is for you to prepare your crypto incomes and crypto taxes in a compliant way.
Token Tax integrates with 50+ cryptocurrency exchanges to generate all sorts of compliance reports such as Schedule C, 8938, FBAR, and 8949, etc
For international crypto taxes, Token Tax is one of the few taxation tools which handles tax liabilities of margin trades from margin exchanges like Poloniex, BitMex, Bitfinex, etc. correctly.
Lastly, if you want a human touch and want to interact with the staff of accountants and crypto tax professionals to get rid of your crypto tax liabilities, Token Tax is the way to go !!
CoinTracking provides the easiest means to track as well as calculate taxes on your cryptocurrency portfolio.
CoinTracking is based out of Germany, Europe and started catering to crypto users in 2013. At the start, it was only a crypto portfolio tracking service to calculate your profits statements.
However, now as a natural recourse, CoinTracking provides full tracking of crypto portfolios as well as the calculation of taxes using advanced calculation techniques such as FIFO, LIFO, AVCO, HIFO, and LOFO, etc
You also get the liberty to download capital gains report and other reports based on several tax parameters for your tax accountants or yourself so that you can DIY the tax liabilities.
Lastly, the imports and integration of CoinTracking are available for all the major exchanges and popular wallets to give you the complete picture if your crypto portfolio and tax liabilities.
ZenLedger another DIY crypto taxation tool on which you can trust to calculate your crypto liabilities accurately.
Established in 2017, ZenLedger is based out of the US and has been helping crypto traders, miners, and crypto holders to ensure they never pay more taxes than required.
Using ZenLedger, you can import your trade level data from all the major exchanges to produce profit/loss statements for you or your CPA.
Apart from that, you can download reports like capital gains, income reports, donation Reports, and closing reports by using the best of the calculations techniques such as FIFO, LIFO, etc.
Lastly, ZenLedger doesn’t forget to account for your ICO investments and airdrops that you have received in your exchange accounts for the taxation purpose to give you the holistic picture of your crypto portfolio.
Another reliable and easy to use crypto taxation tool is CoinTracker. It is based out of the US and serving customers since 2017.
As its name also suggests. It is capable of tracking your coins on more than 50+ exchange worldwide to generate actional gains and loss statements on your crypto portfolio.
Additionally, CoinTracker also gets integrated with your cryptocurrency wallets and crypto lending platforms for ease of calculations. Moreover, CoinTracker is also one of the few exchanges capable of calculating taxes on margin trades by integrating with margin trading exchanges.
Lastly, you can pay the lowest taxes by calculating your taxes on your desired cost basis method, including FIFO, LIFO, HIFO, adjusted cost base, share pool, tax-loss harvesting, etc.
So now I hope you have a clear picture of cryptocurrency tax softwares which are useful for you.
In my opinion, you should go CoinTracking or CryptoTrader Tax software as they seem to be providing a comprehensive set of features to give you relief of your crypto tax liabilities.
I will leave the final call on to you, but before departing, I would like to highlight some of the most commonly asked questions by crypto taxpayers.
So here I go:
What Is Bitcoin & Crypto Tax?
Bitcoin or crypto tax is simply an additional tax that your government expects you to pay when you buy or sell cryptocurrencies. This so because, Bitcoin and other cryptocurrencies keep appreciating in value and governments around the world want to cream off some of your profits the moment you enter fiat territory.
Meaning the moment, you convert the cryptos in fiat currencies like USD or EUR, etc.
How To Calculate Bitcoin & Cryptocurrency Taxes
As I shared with you, calculating crypto taxes is as cumbersome as it gets.
There many exchanges on which crypto users trade and there are different wallets for each cryptocurrency.
On an all, the infrastructure is hugely fragmented in terms of trading as well storage of so many cryptocurrencies which makes the matter impossible to calculate taxes manually.
How To File Crypto Taxes?
If you do your taxes yourself, it would be wise for you to subscribe to a DIY tax software like CryptoTrader so that you can generate a custom report which is compliant and acceptable by tax authorities like the IRS.
On the other hand, if you want something that is completely automated and managed via some human interaction with expert tax consultants or CPAs, it is wise to file your taxes through Token Tax.
How Is Bitcoin & Crypto Taxed?
Bitcoin and other similar cryptocurrencies are taxed as per your national taxation authority. In the US, the body is IRS, and they classify Bitcoin and other cryptos as property.
Hence property tax is applicable on it as per the different tax slabs and different time durations for which one holds these currencies.
There are some countries which classify cryptocurrencies as a commodity and some as legal tender but taxation rates range from 10-30% depending upon the slab of taxation and the period of your holding (like short term capital gains tax or long term capital gains tax)
How To Tax Bitcoin Gains/Income?
Bitcoin and other currencies are taxed based on capital gains.
Capital gains tax works like this:
For example, you bought 1 BTC for $10,000, and now after a price spike, you are selling it for $15,000. You made an extra $5000 here which your gained capital and this is taxable.
On the other hand, there are other types of taxes too on cryptocurrencies like VAT or service tax, etc. But this differs from country to country.
How Much Tax Do You Need To Pay On Bitcoin Profit?
The amount of tax you are liable to pay depends upon your country.
In some countries, there is no tax on cryptocurrencies whereas, in countries like France, crypto-to-fiat transactions are taxed at a 19% flat rate.
In-country like the US, cryptocurrency tax rate can vary 0% to 20% based on the way you are filing taxes and the time you are holding your cryptos for
So now you tell us:
Are you filing cryptocurrency taxes? If you are, how are you calculating it? Which crypto tax software are you using and which country do you reside?
Let us know and if you have any questions feel free to shoot those in the comments below 🙂
Hey there! I am Sudhir Khatwani, an IT bank professional turned into a cryptocurrency and blockchain proponent from Pune, India. Cryptocurrencies and blockchain will change human life in inconceivable ways and I am here to empower people to understand this new ecosystem so that they can use it for their benefit. You will find me reading about cryptonomics and eating if I am not doing anything else.
- Top Cryptocurrency/Bitcoin Tax Softwares