Crypto taxation has become a highly debatable topic, as paying tax for the trade you have carried out on crypto exchanges can be arduous for many. As more and more people have started investing in cryptocurrencies, countries worldwide have begun contemplating ways to regulate the crypto market by enacting new tax regimes.
In a year, active crypto investors usually do several transactions, and keeping track of these transactions and then calculating net profit or loss is a bit challenging. Investors often find the crypto taxation process a little complicated, typically in the initial phase.
Thus, to help solve this issue, several crypto taxation software can be seen in the market today. If you are someone who trades in cryptocurrencies, we have reviewed and compared the best Crypto Tax software to assist you in finding the most suitable tax Software.
Most interestingly , these crypto tax Software automatically sync across crypto exchanges and wallets, calculate your capital gains/ losses and provide you final tax reports, which you can use to file your taxes when required. This article discusses the best crypto tax software: Koinly, TaxBit, ZenLedger, TokenTax, and Fyn.
Crypto taxation in the US
In the US, the crypto taxation rates depend on the length of time you hold a crypto asset, your overall income, and your tax filing status. Besides, cryptocurrencies can be taxed as ordinary income or capital gains, based upon which taxable event produced the earnings.
Those falling in the ordinary income include mining, staking, lending, or payments for goods or services. These rates usually range from 0-45%. Meanwhile, the categories which are taxed as capital gains include crypto trades, sales, or swaps. Your exact rate is determined by the time you own crypto and your overall income. Here, the tax rate ranges between 0 and 37%.
It is often recommended that to evade higher taxes; one should prioritize making long-term crypto trades whenever possible. However, there is a catch. This is because, although long-term trades usually lower a crypto investor’s taxes, at certain times, the state or federal tax rates for an individual’s income bracket make short-term gains profitable.
The IRS describes cryptocurrency as property, and crypto transactions are legally taxable, similar to transactions related to any other property.
Best Crypto Tax Software Solutions
Founded in 2018, Koinly solves crypto tracking and tax reporting for investors. The crypto tax software solution has filed 11k tax reports and has $250million in funds tracked as of 31 October 2022. From the US to Scandinavia to Japan and every other country, Koinly helps you generate your crypto tax reports. Whether you are mining crypto in the Alps or leveraging interest-bearing crypto instruments poolside, Koinly can generate a statement showing all their crypto income. This includes income from:
- Staking Rewards
- DeFi and other crypto income transactions.
- Multiple cost-basis methods. Choose between FIFO, LIFO, HIFO, Average Cost, Share Pooling, and Spec ID.
- Universal or Wallet-based cost tracking. Monitor your costs in a universal pool shared across all interconnected wallets or individually for each wallet
- Smart transfer matching. Crypto tax software uses artificial intelligence (AI) to detect transfers between your wallets and track your original costs.
- Form 8949, Schedule D: For taxpayers in the US, Koinly can generate all the forms you require to file your crypto taxes.
- Localized tax reports
- App has a free version
- It has a star rating of 4.7 on Trustpilot
- Supports more than 6000 cryptos & 350 exchanges
- Easy to use
- Available in 20+ countries
- Expensive for frequent traders
Founded in 2018 by CPAs, tax attorneys, and software developers, TaxBit had a vision of simplifying crypto taxes by automating the regulatory hurdles of tax compliance. Taxing software is an entirely new category of business to enable the widespread adoption of cryptocurrency and other digital assets. The platform connects the consumer, enterprise, and government tax and accounting ecosystem. It transforms the cumbersome experience of cryptocurrency tax reporting and accounting in a way that ensures tax compliance and helps consumers optimize their investments.
The TaxBit software provides industry-leading tax and accounting solutions for cryptocurrency and digital assets. With over 5 million taxpayers’ support, TaxBit boasts 500+ integrated exchanges, wallets, DeFi protocols, NFT marketplaces, and more.
TaxBit brings all your cryptocurrency transactions and balances from your exchanges and wallets into one place to calculate the cost basis and corresponding gains or losses on each transaction. It provides an entire audit trail so users, accountants, and auditors can drill down into any transaction to see precisely how the gain or loss was calculated. The software has received good reviews on various platforms, highlighting customer satisfaction.
- Has supportive customer service
- A free trial is available
- It has an easy crypto tax-filing process
- Provides an immutable audit trail
- Great User Experience
- Supports most crypto exchanges
- Supported by some of the biggest names in the crypto market
- CSV file parsing that could improve (manual formatting only)
- Relatively new
ZenLedger Inc. is a U.S.-based company specializing in cryptocurrency tax management. The platform enables you to import crypto transactions, calculate gains and income, and auto-fill tax forms such as 8949, Schedule D, FinCen114 & FBAR. The software allows you to view tax liability for every cryptocurrency transaction. This software can review historical cryptocurrency tax income like mining, staking, lending, gifts, or exchange rewards like airdrops and forks!
ZenLedger supports over 400+ exchanges, 7000 token types, 20+ DeFi protocols, and all wallets. The software is expected to have support for NFTs soon. The crypto tax software is global, and anyone using multiple ledgers can use it.
- Great UI and customer support.
- Supports over 400+ exchanges
- The crypto tax software is global, and anyone using multiple ledgers can use it.
- Compatible with DeFi applications
- Easy to use
- DeFi integration is available in costly packages.
- It is a relatively new
- The free tax plan is minimal
TokenTax is a crypto tax calculator and full-service accounting firm that provides everything you need to file entirely and correctly, regardless of your trade or location.
From software calculation to tax return filings, TokenTax has the in-house software and accounting abilities to see you via your complete tax process.
The TokenTax team supports every exchange or wallet and attacks crypto tax situations ranging from HODLers to hedge funds. TokenTax’s initial version was developed by co-founder Alex Miles back in 2017. In 2019, TokenTax bought crypto CPAs, a cryptocurrency tax accounting company spearheaded by CPA Andrew Perlin.
TokenTax calculates cryptocurrency taxes and provides global tax and accounting services for thousands of crypto investors.
The software’s essential tools for tax accounting include Tax Loss Harvesting Dashboard and the Minimization accounting method. Depending on the level of trading, investors can avail of three types of services on this platform. These include Basic (For casual Coinbase and Coinbase Pro investors), Premium (For investors operating across exchanges and platforms), and Pro (For investors with high trade volume across exchanges and platforms) at $65/per tax year, $199/tax year, and $799/tax year respectively.
- The software has Tax Loss Harvesting Dashboard and a Minimization accounting method.
- Fill out your crypto tax forms for easy cryptocurrency tax filing.
- Connects and supports every exchange.
- No free version is available.
- Token tax does not offer refunds.
Fyn is a software solution that enables individuals, CPAs, and Accounting Firms to calculate the performance of their crypto investments for tax reporting purposes in a given tax year. Developed to change how people handle their crypto taxes, the crypto taxation software has processed 64.6 million transactions and supports 25 countries.
Fyn is integrated with major crypto exchanges, including Coinbase, GDAX, Poloniex, Gemini, Binance, Bittrex, and more.
Meanwhile, you can import trades from virtually every other exchange via CSV or use a generic CSV file to upload your trades if the exchange is not listed. The software allows you to connect all your crypto exchanges/wallets and preview your gains and losses for free at any time. Have under 20 lifetime transactions? Then you can get your downloads for free!
Fyn permits you to import transactions, calculate gain or loss, and view the summary of your profit/loss for free. The crypto taxation solutions provider only charges for downloading detailed CSVs for tax reporting or capital gains (8949) documents if you have over 20 transactions.
- Investors can test the app for free for up to 20 transactions.
- Supports over 400 exchanges
- Fyn is integrated with leading exchanges like Coinbase, Poloniex, GDAX, Gemini, Binance, Bittrex, and more.
- The software is of great help if you have multiple accounts on the same exchange.
- No tax-loss harvesting tool
- Supported in only 25 countries.
Ways to minimize your crypto taxation
- Hold booming crypto investments for over one year before selling or using them. And also, savings Tax rates on short-term gains are higher than these long-term gains.
- Offset gains with losses: If you have experienced gains and losses on different cryptocurrencies, you can take advantage of crypto gains by claiming losses on other cryptocurrencies for a given year. For example, if you earned $50,000 for selling Bitcoin but lost $50,000 for selling Ethereum, you are not required to pay any tax.
- Donate some of your cryptos to charity, as cryptocurrency donation is tax deductible.
- Finally, Another effective strategy to avoid hefty crypto tax is putting your crypto in a regular IRA or investing in cryptocurrencies as part of your retirement, pension, or annuity investment.