Taxing agencies consider cryptocurrency as property and therefore taxable.
The USA IRS states on their website, “The sale or other exchange of virtual currencies, or the use of virtual currencies to pay for goods or services, or holding virtual currencies as an investment, generally has tax consequences that could result in tax liability.”
Therefore having software that helps you navigate the tax liability is very important.
But what software is necessary or correct for your circumstance?
This guide shows you all the best crypto tax software on the market in 2022.
We’ve tried them all, and each one appeals to a different kind of person.
This guide will tell you which one is best for your situation to save you time and money this tax year.
The options available can easily become overwhelming. That’s why it’s a good idea to first make a proper assessment of your requirements when it comes to the type of crypto owner you are and the accounting needs you have.
So who needs what?
If you’re a casual trader or deal with cryptos on a hobby-basis, then you’ll be able to get by using some of the free services out there like Accointing or CryptoTrader.
If, however, you’re a power-user who deals with thousands of transactions every year, then it’s best to invest in a proper service that synchronizes all your accounts into one dashboard, like CoinTracking or the upgraded tiers of some of the services below.
Finally, if you have your finger in many crypto pies, such as stablecoins, ICOs, and ETFs then it’s best to seek guidance from a certified accountant (CPA) or tax professional who understands each of your asset categories.
Koinly is an app that makes it easy to import your data and download capital gains tax forms like the 8949, Schedule D and export to Turbotax. The web interface is pretty simple to use and supports the US, UK, Canada, Australia and many other countries. Check the website for supported countries
Price range: Free to $400 per year based on features and number of crypto transactions.
CryptoTrader offers an easy way to calculate all your crypto taxes, and has integration with TurboTax.
Price range: $49 - $299 per year based on number of crypto transactions.
Accointing allows you to track your crypto portfolio while keeping a record of all your transactions in order for you to be able to print a tax report at any point in time. It exports your trades in the proper format for taxes in the USA, United Kingdom, Austria, Germany and Switzerland.
Price range: Free - $299 per year based on number of crypto transactions.
We’ve reviewed the best bitcoin and blockchain tax software, now we’re going to focus on the next step of the process: getting that data into Turbotax.
Crypto tax software integrates with your exchange’s API to fetch and compile a list of all your transactions.
Exchanges such as Binance also allow you to manually export your trade history.
Once you have imported your trade history, the crypto tax software will compile this and give you a rundown of total capital gains or losses.
You can now export your data. IRS Form 8949 (Sales and Other Dispositions of Capital Assets) is the most common way to do this, and it’s always a good idea to keep a copy for your own records. You can also export directly to TurboTax’s proprietary online format.
Filing your cryptocurrency capital gains/losses with TurboTax is simple. For this tutorial, we’ll be using the online platform.
To file investment gains and/or losses, you’ll need TurboTax Premier or Self-Employed.
When filling out your financial picture, be sure to select I sold or traded cryptocurrency.
Once you have begun your return and filled out the initial prompts, navigate to the Cryptocurrency tab by choosing Federal > Wages & Income > Cryptocurrency
Here, you can link the third-party service you used to prepare your trade history, or choose to enter information manually.
Upload the .csv file that you prepared earlier.
Check the summary of your taxable transactions to ensure that everything looks right.
That’s it! You’ve successfully imported your cryptocurrency transactions into TurboTax and can rest assured that your capital gains and/or losses will be accurately reported.
Make sure to check out these other crypto tax services as well to find the right one for you!
Crypto tax software makes it easy to properly file taxes on your cryptocurrency trading and protects you in the case of an audit.
Unfortunately, in most countries, the laws and regulations around crypto are murky at best. This is especially true in the Unites States.
Different parts of the government disagree about what kind of asset virtual currencies like Bitcoin are. The SEC does not consider Bitcoin a security. Instead it is a commodity. The IRS considers Bitcoin property.
Virtual currency is treated as property and general tax principles applicable to property transactions apply to transactions using virtual currency.
That means you are expected to keep track of not only every trade but every transaction. Due to Bitcoin’s usage as money, the IRS has a hard time differentiating between using Bitcoin as a speculative asset to be traded and and using Bitcoin to buy a cup of coffee. This makes trading and using Bitcoin and other coins with different legal definitions very cumbersome come tax season.
On top of that, the IRS has warned many holders of crypto that they are very serious about citizens who skirt the laws or try to use crypto to evade taxes…and they will find out.
You could spend countless hours tracking all of your trades and purchases and trying to make sense of capital gains. This is amplified by the fact that individual states have their own laws.
That’s why software like the one’s recommended above are so handy. Sure, each of them cost a few bucks, but for the time you save and the protection this software gives you if you are ever audited is worth every satoshi.
Short of moving to Puerto Rico or El Salvador, if you are taking profits on crypto, there is no way to get out of paying taxes on it.
That said, there are a few strategies to minimize your tax burden.
If you are actually willing to move to Puerto Rico, there are some great services out there that make the process pretty seamless, such as relocatepuertorico.com.
Crypto tax software is pretty simple - instead of having to calculate all the taxes you owe on all your trades or crypto income, you can input your data into crypto tax software and it will generate what you owe.
The software always supports Bitcoin, Ethereum, Litecoin, Defi and nearly any other coin.
It will also hand that information over to your regular tax software, like turbotax.
If you make lots of trades, most crypto tax software will connect to your exchange accounts and import the data for you.
If you have ever paid taxes on real estate or any other hard asset, then crypto works the same way. Any profits are taxed as capital gains.
That means you pay taxes on the difference between the price you bought the coins and and the price you sell them at. This is true whether you live in Canada, the US, or the UK, as well as many other countries.
You must report both profits AND losses. However, if you report losses, you may actually be entitled to reduce your crypto taxes in the future so its actually in your interest to report these losses.
Yes, anytime you trade one cryptocurrency for another, you are effectively selling the first currency and buying the second one.
This creates either a profit or a loss of the first cryptocurrency and a new cost-basis for reporting the second. Make sure to keep track of all crypto to crypto trades.
If you do not own the second wallet, then yes, you must pay capital gains on the coins you transferred since you are effectively 'selling' them.
If you own both wallets, there is no sale, and therefore there is no tax reporting liability.
For the past two years, tax filing deadlines and requirements have been delayed by the IRS due to covid issues. It is NOT expected that the filing deadlines will be affected by covid for the 2021 tax year. So if you need an extension for filing your return you will need to fill out and submit Form 4868 by April 18, 2022 with payment for the estimated taxes that are due.
Even in 2022, most jurisdictions will not allow you to pay any taxes in crypto of any kind. There are a few places, such as the Swiss canton of Zug and the US state of Ohio, among others, to allow residents to pay their taxes directly in Bitcoin. Overstock.com became the first US company to pay all of its taxes in Bitcoin. The state of Colorado is also looking into accepting Bitcoin for tax payments.
Some exchanges do give you detailed trading reports of your year's activity, such as Coinbase does.
That said, these are not technically the same documents that you will have to turn in to the IRS. Some exchanges will not even produce documents like these at all. Don't rely on an exchange to:
Unfortunately, it is on you to make sure your taxes are paid and properly documented on the correct forms.
FIFO means your earliest buys will be the ones considered for capital gains when you sell. LIFO means your most recent buys will go first when considering which coins were sold for capital gains.
FIFO is the most common method used, since it usually sets you up to pay less in taxes due to sales being long term gains rather than short term.
If you have deposited coins in interest accounts such as those found at Ledn or Blockfi, you may be wondering how that interest will be treated at tax time.
All interest in a crypto savings account is treated the same way normal fiat interest accounts are treated - as income!
So you don't need to pay any capital gains on this interest.
In October, PayPal made it possible to buy, hold, and sell digital currency directly on its platform. You cannot, however, withdraw the Bitcoin from your account, leading many to wonder if it will be taxed the same way, since you are never taking control of the private keys.
Digital assets on PayPal will be taxed exactly the same way it is taxed when you hold the coins yourself. Namely, a taxable event occurs every time you sell cryptocurrency, be it for another cryptocurrency or for a cup of coffee.
PayPal also clearly states that determining your tax liability is placed firmly on you.
It is your responsibility to determine what taxes, if any, apply to transactions you make using your Cryptocurrencies Hub. You can access your transaction history and account statements through your PayPal account for purposes of determining any required tax filings or payments
These are the best crypto tax software on the market in 2022. They are:
So you really can't go wrong with any of them.
But what do you think? Are we missing a great software on this list?
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