While there is a tremendous amount of excitement around the cryptocurrency market these days, investors who are new to the space need to remember that there is a key area of importance that cannot be overlooked when getting involved in this space: taxation.
Sure, there are a handful of countries where cryptocurrency holders do not have to worry about capital gains or other types of taxes on their bitcoin and other crypto assets, but the vast majority of the world operates in a manner in which cryptocurrencies are taxed in a manner similar to traditional types of investments.
Due to how often many crypto users end up moving between different tokens and coins, it’s vital to get some assistance in the form of crypto tax software. Let’s take a closer look at some of the best crypto tax accounting solutions on the market.
Why Do I Need Crypto Tax Software?
The main reason that you will find that crypto tax software is a necessity is that the rules and regulations around the crypto industry are still rather complicated. Even when you go outside the realm of taxation, there is a tremendous amount of uncertainty around how all of the technology around bitcoin and other crypto assets will be regulated.
In terms of taxation, many jurisdictions are still trying to figure out how exactly they’re going to treat the gains crypto users enjoy from their activities in this new, emerging market. Anyone who sells cryptocurrencies, even if they received them as payment rather than buying them as speculative investments, will likely be facing a taxable event due to that sale.
Additionally, taxable events also occur when you’re simply using a cryptocurrency to purchase something online or in a physical retail store. Obviously, anyone who is all-in on the cryptocurrency revolution will find themselves with a lot of tax headaches if they aren’t automating all of this activity with software that is meant to simplify all of these obligations.
Bitcoin tax software is able to tax care of all your crypto tax issues automatically, which can help you avoid doing hours of your own crypto accounting manually.
The Best Crypto Tax Software
Looking for the best crypto tax software to get you the best return and save the most time? Our curated list of tax software providers gives users the best-of-the-best when it comes to making sense of your crypto-related tax issues. Here’s the top choices according to our editors:
- Leading tax software for crypto users
- Support for all the major crypto exchanges and wallets
- Optional free version
- Available in a large number of countries
- Free version available
- 100% Money-back guarantee
- Integrated with TurboTax for added simplicity
- Tools to automate connections to exchanges
- Global crypto tax software endorsed by many figures in the industry
- Full host of features including tax loss harvesting, margin trading and more
- Can work as standalone tax software
- Full team of accountants to assist you
- Free crypto tax software for individuals
- Useful for consumers and institutions alike
- A one-stop shop for cryptocurrency accounting
- Very reputable company with backing from the biggest names in crypto
Best Overall Crypto Tax Software: Koinly
The best example of the level of simplicity that quality crypto tax software can bring to your life is Koinly.io.
You can easily import all of the trades you made in the past year via API keys or CSV files from all of your exchange accounts. Additionally, you can also track the changes in the public addresses associated with your crypto holdings that are held more privately.
Koinly even has the ability to track gains related to new forms of crypto finance such as staking, borrowing, and lending. This crypto tax software also includes a fully functional portfolio tracker, which means you can track your overall gains or losses throughout the year. You can even track your expected capital gains taxes over time rather than getting a surprise once tax season roles around.
- Leading tax software for crypto users
- Support for all the major crypto exchanges and wallets
- Optional free version
- Available in a large number of countries
An Alternative Crypto Tax Software Option: CoinLedger
While Koinly is generally regarded as the gold standard of crypto tax software, CoinLedger can also be viewed as a credible alternative.
Much like Koinly, you’re able to import your trades from basically any crypto exchange, but CoinLedger also has additional functionality focused on crypto income, which makes it a preferred solution for many crypto users who also work in the bitcoin and greater cryptocurrency industry.
CoinLedger can also help you deal with crypto that you obtained through mining, staking, gifts, airdrops, and forks. The platform’s tax loss harvesting feature also allows you to offset some of the taxes you may owe in a particular fiscal year.
- Free version available
- 100% Money-back guarantee
- Integrated with TurboTax for added simplicity
- Tools to automate connections to exchanges
Best Web3 Tax Software: Fyn
You’ll quickly notice that most crypto tax software falls into some very familiar pricing territory. There’s generally a free version with very limited functionality then there are tiers that usually start at around $50 and can go up to several thousand dollars for incredibly intricate tax situations.
Fyn (formerly Bear.tax) bucks that trend by offering a $10 a year version that offers a number of features. You’re only allowed 20 transactions but you get access to the rest of Fyn’s features for that price. Fyn also offers a discount to users who buy at two years of tax accounting.
- One of the cheaper crypto tax options
- Only available in a handful of markets
- Supports traditional tax software
- Option to communicate with an actual tax professional
The Competitors: TaxBit, TokenTax, CoinTracker
Of course, there are many other crypto tax software solutions out there as well. And some of the smaller players in the market tend to have unique, niche features that help them stand out from the rest of the pack.
TaxBit is a popular alternative to some other other major options in the crypto tax software market due to their focus on enterprise solutions. While they also offer the same form of automation for individuals found with other offerings, TaxBit can also help crypto companies handle tax automation for their end users. Additionally, TaxBit is funded by well-known firms in the crypto space such as Winklevoss Capital and Coinbase Ventures.
TokenTax is another option that is trying to carve out its own space in the crypto tax software industry. With this platform, there is a focus on tokens and decentralized finance (DeFi) platforms. While other platforms may only have support for centralized exchanges, TokenTax is able to track all of your activity on DeFi apps like 1inch and Curve Finance. If you’re operating on the cutting edge of DeFi, then this will be the best crypto tax solution for you.
A final competitor to consider when it comes to bitcoin tax software is CoinTracker. While there aren’t many unique features or offerings from this particular option, the fact of the matter is they may have the most simple and intuitive user interface out of any of the options on the market today. If you’re someone who doesn’t need any extra bells and whistles, then this may be the simplest way to deal with your crypto taxes every year.
- Free crypto tax software for individuals
- Useful for consumers and institutions alike
- A one-stop shop for cryptocurrency accounting
- Very reputable company with backing from the biggest names in crypto
- Global crypto tax software endorsed by many figures in the industry
- Full host of features including tax loss harvesting, margin trading and more
- Can work as standalone tax software
- Full team of accountants to assist you
- Tax software designed for extensive DeFi (decentralized finance) users
- Integrates with traditional tax software
- Free version available
What is Crypto Tax Software?
Crypto tax software is any sort of computer program that makes it easier for you to handle the taxes associated with your activity in the cryptocurrency market.
In many cases, this sort of software will also include a complete crypto portfolio tracker, which allows you to get a bird’s eye view of all of your crypto holdings across many different exchanges and wallets in one centralized interface.
Crypto traders are able to save hours of time by using crypto tax software because it automates the process of learning the local crypto tax code, keeping up with any potential changes to the law, keeping track of all the crypto trades that you make on a regular basis, and filing your taxes every year.
Do I Have to Pay Taxes on Bitcoin?
Laws related to capital gains taxes can be rather complex, and there is not one rule that can be followed in every country around the globe. These sorts of taxes usually vary depending on how long an asset is held, and you’ll usually find that you’re able to gain access to much lower rates (even 0%) by holding onto bitcoin and other crypto assets over the long term.
While you’re generally going to have to pay capital gains taxes on crypto-related gains in the vast majority of countries around the world, there are a few exceptions to this rule. Here are some examples of locations where it is possible to pay 0% capital gains taxes on your crypto sales:
It should be remembered that many of these countries have requirements in terms of how long you must hold a crypto asset before you can qualify for the 0% capital gains tax rate. Other countries, such as Austria, don’t tax crypto if you fall into a certain income bracket.
Additionally, crypto regulation in general is in a state of flux, which means the laws around these tax rates could end up changing rather quickly. Finally, it should also be noted that, in many countries, the use of bitcoin and other cryptocurrencies to pay for a good or service is considered a sale of that crypto asset, which means it is also a taxable event.
If you’re in doubt about what you owe, be sure to check with an accountant in your jurisdiction.
How Does Crypto Tax Software Work?
Crypto tax software works by automating as much of the tax process related to cryptocurrencies as possible. This means that the best crypto tax solution on the market should make it so the user has to do as little work as possible when it comes to filing their crypto-related taxes.
In terms of specific forms of automation, this type of software is able to figure out the current taxes related to cryptocurrencies in your jurisdiction, automatically import your crypto trades from exchanges and wallets, and help you file your taxes in the simplest way possible.
What Features Should I Look for in Tax Software?
Since the entire point of any kind of tax software is to automate the process of filing your taxes, your main priority when looking at crypto tax software should be finding a solution that requires the least amount of input from you to get your taxes filed. Different types of tax software tend to focus on their own niches, so there are some specific features you may want to look for when it comes to crypto taxes specifically.
Seamless Imports
The most important feature of crypto tax software is the ability to automatically import your portfolio and trade history from all of your different wallets and exchange accounts. This is really 99% of the work when it comes to crypto taxes, so automating the process can save you hours of extra work.
Different tax software can support different exchanges and wallets, for example some software does not yet support various DeFi applications, so you should make sure the platforms you use are supported before choosing your tax software.
Tax Harvesting Functionality
Other than exchange and wallet support, you may also want to look at tax loss harvesting as a must-have feature of bitcoin tax software. Tax loss harvesting is a strategy that is often used in the investment world that is intended to lower the overall capital gains taxes you owe at the end of the year. Notably, reporting losses on a particular crypto asset can also lower your income tax obligations. A few different crypto tax software solutions include functionality to help you figure out whether you should try to trigger a capital loss in order to lower your taxes for a particular year.
Pricing
Most (if not all) crypto tax software tends to fall into some version of the following structure for pricing:
- Free version (limited transactions)
- $50 (50-100 transactions)
- $100 (100-1000 transactions)
- $200+ (Unlimited transactions)
Therefore the amount you’ll pay often depends on how actively you trade cryptocurrency. If you purchase cryptocurrency once or twice a year then you’ll easily get by with the cheapest tier.
It’s important to note, however, that many functions in cryptocurrency, including transfers, staking, mining, crypto rewards and more count as transactions so don’t be surprised if your transactions are higher than expected.
One nice thing about most tax software is you actually get access to most of the functionality of the software and won’t have to pay anything until you go to export your actual documents to file taxes.
It’s worth shopping around a little to find the price point that works best for you.
Customer Support
Taxes can be confusing so it’s very helpful to have good customer support for tax software.
Unfortunately for many of the tax software companies the best customer support is built into the higher priced plans.
Many tax software suites can set you up with an actual real-life tax professional to help sort out your issues but that can be very costly (potentially thousands of dollars).
Most of the time live chat or email support will suffice, however, and those are offered on most tiers.
Is Crypto Tax Software Safe?
In general, crypto tax software is safe because it is not intended for trading or any other kind of activity where your funds could potentially be at risk of theft or loss. When you add an exchange account or public crypto address to your crypto tax software, you are doing so in a manner that does not put your money into the hands of a third party. Instead, crypto tax software is intended to simply be able to view your crypto activity.
That said, you still need to be on the lookout for malicious software. You should only stick to the crypto tax software that we have reviewed and approved, as some apps will try to trick you into handing over sensitive information or potentially even place malware on your computer. Additionally, you need to make sure that you’re setting up your exchange API keys correctly, as they can also be used for trading via third-party apps. You should always make sure that you are using an API key associated with your exchange account that only allows third-party apps to view your crypto trades rather than make trades or withdrawals on your behalf.
Is Crypto Tax Software Free?
There are a variety of different pricing models when it comes to crypto tax software. Some platforms will ask you to pay before you’re able to file your taxes, while others will offer basic features for free and then try to upsell you on extra features that may be targeted towards specific types of crypto trades.
In general, you can expect to get some assistance with your taxes for free from a variety of different crypto tax solution providers. That said, you will get the highest level of automation and support if you’re willing to pay a little extra for your crypto tax services. You should always check to see what features are offered for free before choosing a crypto tax service if you’re not looking to pay extra for the help that you can get from these platforms.
The History of Paying Taxes on Crypto
The first thing that must be said about the history of bitcoin and crypto taxes is that there was never a point in time when these assets were not taxed at all. While the specific taxes involved with crypto vary from country to country, it’s not like activities related to mining, trading, or spending bitcoin and other cryptocurrencies did not exist until various tax agencies started to comment on the subject.
Most governments are always going to try to collect taxes on any income earned by the citizenry, so the idea that they’re going to ignore the first few years of bitcoin when the crypto asset wasn’t really on the radar doesn’t hold any weight.
The United States Internal Revenue Service (IRS) was the first major tax agency to comment on bitcoin and “virtual currencies” back in 2014. At the time, the IRS deemed that virtual currencies would be taxed as property. Fast forward to 2019, and the IRS had added a separate question to the 1040 form where the individual is supposed to clarify whether they’ve been involved in any cryptocurrency-related activities over the past year.
The first bitcoin tax software began to pop up in 2013, back when there was really only one crypto asset that anyone was paying attention to in the market. Around the same time, Coinbase and other major exchanges began automating much of the tax reporting processes on behalf of their users.
Looking forward, it may not be long before this sort of tax automation is included directly in some cryptocurrency wallets. At this point in time, the fact that spending crypto comes with tax implications in many jurisdictions around the world is a major deterrent to this technology making it as a mainstream payments solution.
Frequently Asked Questions About Paying Taxes on Crypto
In most of the world: absolutely.
There’s a common misconception that crypto is some get-out-of-jail free card where you can just pocket all of your gains. In reality crypto is more like owning stocks or real estate where you’ll have to pay taxes on your gains.
There are a few jurisdictions that don’t tax crypto but you should check carefully before assuming you don’t have to pay taxes.
No. Transferring crypto from one wallet to another wallet is generally not considered a tax event.
The laws regarding this are still somewhat murky but, in general, yes.
You’ll have to check with your local government but generally no.
Fortunately it’s usually relatively easy to convert crypto to cash so that shouldn’t be a problem.
It depends. In the USA Bitcoin is considered “property”, not currency, which makes it a capital asset like stocks, bonds or real estate. If it goes up in value and you sell, than you’re going to have to pay a capital gains tax.
Meanwhile in Canada, for instance, Bitcoin is treated as a commodity and all your gains are treated as business income.
Be sure to check the laws in the country where you reside.
