Ben Franklin said the only thing in life that’s certain is death and taxes, and while cryptocurrencies wouldn’t be created for another 240 years, the same remains true today. If you have income from crypto, you need to pay the tax man.
That’s easy to say, but the process leaves many wondering where to start and how to proceed. Moreover, collecting information on all of your trades and compiling them in your tax returns can be a daunting task.
Fret not my fellow hodlers, as in this post, I am going to give you exactly what you need to know. I am also going to give you 8 of my favourite crypto tax tools & software that could help simplify this process.
But before diving in, let’s take a look at some taxation regulation.
Global Crypto Tax Treatment
If you’re in the U.S., the U.K., Japan, France, or Australia then crypto taxation is something you need to take seriously. These are the countries that already have tax regulations in place, and they expect their citizens to pay those taxes reliably.
Here’s a table from the CryptoResearch Report which shows how cryptocurrencies are classified by these countries, and what taxes citizens are required to pay:
|Country||How Crypto is Classsified||Type of Tax Paid|
|United States||Property||Capital Gains Tax|
|Australia||Property||Capital Gains Tax|
|Japan||Legal Method of Payment||Income Tax
Capital Gains Tax
|United Kingdom||Asset/Private Money||Capital Gains Tax|
|France||Movable Property||A flat rate of 19% plus others|
As you can see the tax laws for cryptocurrency varies depending on the jurisdiction. That aside, there are still many useful tools for calculating crypto taxation, and for simplifying filing paperwork.
Much of this software works for any number of countries, can import data from crypto exchanges, and can generate all the appropriate tax forms. Think of these tools like TurboTax, but for cryptocurrency activity.
Once you’ve collected all your crypto records through this software you can take everything to your tax accountant to figure out, or you can use tax preparation software and handle everything yourself.
While crypto taxation is intimidating for many, using these tools really makes it quite simple, and there’s nothing to fear when filing taxes. According to Coinbase:
All crypto sells, conversions, payments, donations, and earned income are reportable by U.S. taxpayers
The following events are considered taxable in nearly all jurisdictions that require tax payments on cryptocurrencies:
- When you sell your cryptocurrency for fiat (USD, GBP, AUD, JPY, EUR…)
- Exchanging your cryptocurrency for another cryptocurrency
- Using your crypto assets to pay for goods or services
- When you receive cryptocurrency as earnings (either through mining or as payment for services offered to a third party)
There are some crypto transactions that aren’t taxable though, and it’s good to know what these are so you don’t inadvertently end up paying too much in taxes. Examples include charitable donations, transferring crypto between wallets, and buying and holding cryptocurrencies. Other country’s tax authorities have made similar rulings.
In the U.S. tax authorities have stated that even if a return is accepted now it is open to audit from the IRS and tax payers could be asked to file an amended return years later and pay back taxes.
Top 8 Best Crypto Tax Tools
The good news is there is software which will identify which transactions are taxable and which aren’t, saving you from making that determination yourself.
They do this through a series of questions, which are also input into the appropriate tax forms. The tax tolls will also try to help lower your tax bill by using capital loss deductions if you’ve had losses on your crypto trading and investing activities.
With all of that aside here are the top 8 cryptocurrency tax software tools available to traders and investors today.
While some of the crypto tax software later in this list seem pretty complicated that isn’t the case with CryptoTrader.Tax. According to the website it will let you finish your crypto taxes in “the easiest and most reliable way.”
The tool supports over 35 different exchanges, making it simple to import your trades and easily calculate gains and losses for the entire year. It really doesn’t get much easier or simpler.
There are plenty of other useful features baked into the platform which make it a very straightforward method for anyone to calculate their tax liability from their cryptocurrency activities. One of these features is the automation of all the reports and forms needed when filing.
Main User interface of CryptoTraderTax
CryptoTrader.tax will not only generate the IRS Form 8949, it will also create an Audit Trail Report, a Short & Long Term Sales Report, a Cryptocurrency Income Report, and many others. The platform then allows users to download these reports so they can integrate the data into programs like TurboTax and TaxAct, or send them to a tax accountant.
By using CryptoTrader.tax throughout the year traders can keep an eye on their profits and losses, and their tax liability. This can help in reducing capital gains and taxable events if that’s useful.
Traders can get started for free with the platform, and if they use it to file there is tiered pricing from $49 to $299 per tax year based on the number of trades imported.
This is a crypto tax solution that makes it simple to manage your taxes and it does it at a reasonable price. Plus it will reduce or eliminate much of the stress associated with crypto taxes and provide reliable and accurate tax reports.
Koinly combines crypto accounting and tax all in one software package. The UI is one of the best in the crypto tax field, and in addition to handling tax reporting for the U.S., Australia, and Canada it also supports tax reporting for more than 20 other countries.
These aren’t just generic files being generated either. These are actual reports that users can submit directly to their tax authorities. For example, U.S. users will receive a completed Form 8949 and Schedule D in pdf format.
Of course Koinly has an API that allows it to connect to major exchanges, and it supports over 300 different exchanges as well as over 70 wallets and more than 6,000 blockchains. It will synch users complete transaction history quickly and easily.
Features of the Koinly Tax Tool
What really sets this platform apart is that it isn’t just for taxes. You can use it to keep track of your crypto portfolio as well, watching how it changes over time, and generating some really lovely graphs. While there are certainly other portfolio tracking tools, Koinly shines by offering both portfolio tracking and tools to monitor and reduce taxes.
Koinly has a feature that matches transfers between exchanges and your own wallets, which helps avoid unnecessary taxes. It also has a smart error handling system that warns when there are discrepancies in the data or when there might be inaccuracies in the tax report. They also have a crypto tax guide to help users get the most out of the platform.
Koinly also lets users get started for free. Payment is only required to generate reports. Prices range from $79 for up to 300 transactions to $399 for up to 10,000 transactions.
Another great alternative crypto tax tool is that of TaxBit. This is one of the only crypto tax software packages that was founded by blockchain CPAs and cryptocurrency tax attorneys.
Not only this, but TaxBit is the only company that we have on the list that has received substantial venture funding. In January of this year they had announced a $5 million seed round from a number of well-known investors. These include the likes of Peter Thiel’s Valar Ventures as well as Winkelvoss capital (amoung many others).
So, you know that the software has powerful backers behind it, but is it any good?
TaxBit User Interface
Well firstly, although this is a crypto tax tool (supports over 4,200 coins), it also supports a range of other assets. The likes of commodities, equities and other fiat currencies. This means that you can use it for your other trading purposes.
Something else that I really liked was their portfolio analytics tool. Unlike most software that is used only at the end of the year to generate the returns, TaxBit allows you to monitor your portfolio live and on a continuous basis. This gives you a full picture of your potential tax position currently.
You will also appreciate the immutable audit trail that has been designed by CPAs. This means that in the even that you were to ever get an audit from the IRS, you could easily drill down into any transaction and see how gains / losses were calculated on the cost basis.
TaxBit User Interface
The software also lets you customise your personal tax rate. Using the demographic information that you provide, TaxBit calculates your individual tax rate by taking into account the state and federal levels. This can give you the most accurate picture of your liability or refund.
And finally, when it comes to submitting your forms to the IRS, you can easily download IRS form 8949 with all of your trades. You can either download this in a simple pdf form to be sent to your accountant or you can download it for use in tax filing software such as TurboTax, TaxAct et al.
When it comes to pricing, TaxBit has three tiers. They have basic for $50, Plus for $175 per year and Pro for $500 a year. Below are what each of the pricing options entail:
- Basic: 250 Transactions, 10 Exchanges / Wallets, Current Year Tax Form and Chat Support.
- Plus: 2,500 Transactions, Unlimited Exchanges / Wallets, All tax forms and Chat Support.
- Pro: 25,000 Transactions, Unlimited Exchanges / Wallets, All tax forms and CPA Phone Support
CoinTracking calls itself the leader in cryptocurrency reporting and tracking, and with over 490,000 clients, including more than 750 corporate clients, they might not be wrong. CoinTracking is particularly detailed, and users will know exactly how their portfolio is performing, how diversified they are, and what their tax burden is going to be all throughout the year.
CoinTracking has a web-based solution which allows for the easy connection to exchanges via an API, or through CSV files. This allows CoinTracking to display the complete trading history of a user, and determine profits, losses, and taxes owed. Final reports can be generated in a number of formats, including CSV, PDF, XLS, XML, and JSON.
The CoinTracking Tax Report Feature
The platform aggregates all of the transactions made through the connected accounts, showing exactly what was sent or received, and the exact trades made over the course of the year.
The platform also shows the historical coin prices at the time the trades were made, and has over 11 years of data on more than 7,000 altcoins. Over 70 exchanges are supported, including more than a dozen that are closed.
CoinTracking begins with a free tier that can be used for up to 200 transactions, although the tax reporting and linked accounts are limited. To fully unlock the features a Pro account is needed. This is just $9.99 per tax year and covers up to 3,500 transactions. Unlimited transactions are an affordable $49.99 per tax year.
Accointing is one of the newer tax accounting solutions, having been launched in 2019. It also claims to be an all-in-one solution that covers everything crypto and tax related. It does have a user-friendly interface, and in many cases you’ll be able to get your crypto-tax information together in just a few clicks of your mouse.
One of the most powerful features is the portfolio management tool that comes with Accointing. You can even drill down to view the state of your portfolio at a specific timeframe. Related to this is the Holding Period Assistant dashboard, which will look at when you added cryptocurrencies to your portfolio and then make tax-strategy recommendations such as a tax-loss harvesting strategy, based on your holdings and holding period.
When it comes to crypto taxes, Accointing has you covered. The Tax Review feature automatically goes through all the steps required to accurately calculate your tax burden. It will even generate reports based on different cost accounting methods, giving you the ability to easily choose the best for your situation. And it allows you to mark off transactions as airdrop, hard fork, gift, or payment.
All of this is made possible by the import function of Accointing. The data import software included in the Accointing package makes it super easy to upload everything from wallets and exchanges via CSV or API. Once you’ve linked all your wallets and exchange accounts it’s as easy as clicking a mouse button for accounting to pull in all your data and begin its tax calculation magic.
You might think all this is going to be expensive, but you’d be wrong. In fact, if you have 25 transactions or less Accointing is free to use. That includes all the features of the software, not some watered down version. If you have more transactions you do have to pay for the software. The first tier covers up to 500 transactions and costs $79. Considering the amount of time Accointing will save you this is a real bargain. Prolific traders can move up to cover as many as 5,000 transactions for $179 and the top tier covers 50,000 transactions for $299.00.
Overall Accointing is a very powerful and user friendly tool for tracking your portfolio and generating tax reports. Both features will save you time and quite possibly a good bit of money.
BitcoinTaxes is another popular crypto tax solution. Launched in 2014, it is a web-based solution which offers users a group of excellent tools for tracking annual tax obligations. It includes the ability to generate detailed tax reports including all the transactions carried out throughout the year.
These reports include transaction data pulled from many popular exchanges such as Coinbase Pro, Bittrex, and others. It’s also possible to add your own data via CSV files, and users can add any funds they’ve spent on personal items or donations. The platform also supports importing any mined cryptocurrencies that may have been received throughout the year.
Bitcoin Taxes capital gains calculator
The platform will generate your capital gains for the year, which can then be input into the tax software of your choice, or can simply be printed out to share with your tax accountant, or to attach to your tax return.
One huge downside to this platform is the need to manually enter the coin price for each separate time-frame. This could create quite a bit of work for active traders.
You can get started for free at BitcoinTaxes, and the paid plans begin at $29.95 per tax year. The platform is available to residents of the U.S., the U.K., Germany, Canada, and Australia.
LukkaTax was previously called LibraTax, and the original version has been around since 2014. This is another popular crypto tax platform frequently recommended by crypto enthusiasts who are also interested in keeping up to speed with their taxes.
The LukkaTax website claims you can collect your data from any source, including both exchanges and wallets. The platform will calculate based on crypto-crypto trasactions, crypto-fiat transactions, and mining transactions.
Main Benefits of LukkaTax
The platform supports over 3,700 different cryptocurrencies. The platform generates a number of different reports, including the IRS Form 8949 needed to file taxes in the U.S.
LukkaTax costs a flat $19.99 for the tax year, no matter how many transactions are being input to the platform. There are versions for tax professionals and institutions, which costs $39.95 per tax return.
In addition to tracking crypto activity for the current tax year LukkaTax has the ability to look back in time and calculate tax obligations for prior years for those interested in filing an amended return.
ZenLedger is a simple and effective platform for calculating cryptocurrency taxes, and those who also use TurboTax may want to seriously consider using ZenLedger for their digital assets since it’s the official partner of TurboTax. The platform integrates with over two dozen popular cryptocurrency exchanges, and has support for a large majority of fiat and cryptocurrencies.
ZenLedger will quickly import transaction history from supported exchanges, and will use the data to automatically fill in the required information in tax documents. This includes capital gains, donations, closing statements, and income from cryptocurrencies. The platform also generates a profit and loss statement.
ZenLedger integration into TurboTax
All of the reports and documents created by ZenLedger are IRS-friendly. That means they can all be submitted directly or used in conjunction with other tax reporting solutions. ZenLedger works perfectly for all levels of crypto enthusiasts.
ZenLedger pricing starts at $69 for 100 transactions and climbs to $999 for unlimited transactions. It’s not the cheapest solution, but it is worth the price.
While no one enjoys doing taxes, these solutions make finishing the crypto-portion of taxes easier and less stressful.
Best of all, with the landscape surrounding cryptocurrency taxation continually changing, these platforms will keep in front of those changes and help their users remain compliant with the latest tax laws in their respective countries.
Using one of the seven solutions provided above will ensure the correct information is being collected and reported to tax agencies, and could help users avoid any penalties or fines. Keeping track of tax information for digital assets can be a challenge, but these crypto tax tools make it far easier.