Best Cryptocurrency Tax Software For 2020 – Complete Guide to Bitcoin Taxes
Back in 2017 the cryptocurrency craze hit the mainstream world.
Suddenly, news of people getting rich overnight grabbed everyone’s attention. Naturally, the government didn’t fall on deaf ears and has shown a significant interest in the crypto markets. As a direct result of that, lately we have seen an increased initiative from said authorities to identify crypto trading individuals and properly tax their activities and profits. At that time, nobody thought about crypto taxes and there were almost no specialized crypto tax software tools on the market. That has changed in the last couple of years and the cryptocurrency tax software has grown into a whole sector within the crypto industry.
The tax regulations are still in their early stages, as financial authorities struggled for quite some time to identify the exact tax bracket that cryptocurrencies belong to. Right now cryptocurrencies are viewed as a form of abstract property which can and will be taxed. Tax enforcement is difficult as crypto addresses usually don’t have a names publicly attached to them, so the tax man struggles to realize who should pay the taxes. The IRS reports that about 800 to 900 Americans filed taxes on property “likely related to Bitcoin” in the years 2013, 2014 and 2015.
Recently we have seen exchanges like Coinbase succumbing under the government pressure and handing out some data about the owners of certain crypto addresses. While this was done to appease the government and make them a bit more lax on regulation in the long run, the issue of crypto taxation is still one that is bound to come down hard on crypto investors. Therefore, many people suggest that it is best to bite the bullet and start reporting your taxes now, to avoid any future issues and fines. A host of online tools has been made in an effort to prepare people for this and to help them determine how much tax they owe. Tax software is among those tools and this article will share some of the best ones out there.
8 Best cryptocurrency tax software tools
CryptoTrader.Tax is built to be the easiest and most user friendly platform for calculating your cryptocurrency taxes and generating your necessary reports. It serves as a “one-stop shop” to handle cryptocurrency tax reporting for all types of cryptocurrency use cases. Whether you are mining, staking, lending, or simply buying or trading, CryptoTrader.Tax will automate your tax reporting. Signing up and testing out the platform is completely free. You can import all of your data and make sure everything looks good before ever having to pay. This is much different than any of the other tax platforms out there who make you pay upfront. Once all of your data is in and everything looks good, you can pay for and download your tax report. CryptoTrader.Tax has also partnered up with companies like Intuit TurboTax so that you can plug your reports into these filing softwares.
CryptoTrader.Tax has been around for over three years, and is one of the most used tax platforms on the market. It currently supports over 40 of the most popular cryptocurrency exchanges and platforms. Included with your full tax report is an Audit Trail Report, IRS Form 8949, Short & Long Term Gains Report, Cryptocurrency Income Report and more. Simply import your historical transaction data into the app, and generate your tax report with the click of a button. You can import your data by connecting your exchange accounts or by importing via CSV files. Pricing plans range from $49-$299, but getting started and importing all your data is completely free. This ensures you get accurate reports before ever having to pay. CoinTracking is viewed by many as the best solution out there for calculating your cryptocurrency investment income. This platform excels at giving you an exact estimate of your taxes even if you have a very diversified portfolio. Along with being a crypto tax app, it can be used as a regular crypto portfolio tracker as well.
It is a web-based platform which allows its users to connect their exchange accounts using CSVs or APIs. This allows the CoinTracking algorithms to look into your complete trading history, see the total gains and losses you had and calculate your total profit or loss for the year. Final results can be exported in Excel, PDF, CSV, XML or JSON formats. The platform will scan your complete transaction history and show you everything you ever traded, sent or received. In my example it revealed a couple of airdropped coins which I didn’t even know were in my exchange wallet. The coin prices (both current and historic ones) are automatically retrieved which spares you from spending time on manually importing them. CoinTracking supports over 5000 digital currencies and around 25 exchanges, making it a valuable asset for anyone who does their crypto trading and holding on multiple platforms.
Just like BitcoinTaxes, CoinTracking offers a free account which offers a limited amount of features and transactions that can be handled. Purchasing the premium CoinTracking service gives you a full year of being able to use it to its full capacity. This means that if you purchase the service in April of 2018, you’ll be able to calculate your taxes for 2018 and everything you earn/spend until April of 2019. The full service includes a Capital Gains Report done with FIFO, LIFO, HIFO or LOFO calculation and is fully prepared for accountants and tax office personnel. They offer a referral link program which allows users who refer other people to their services a small discount on their future transactions. Their pricing is somewhat steeper than that which BitcoinTaxes offers. Ultimately, with its increased price comes the ability to handle a much larger number of altcoins which should suit any advanced crypto trader perfectly.
Koinly is a crypto tax software that give you capital gains report, income report, and transfer detection. The app is also a great fit for mining companies and ICO startup companies. Koinly supports over 100 countries globally and 300+ exchanges, 6000+ cryptocurrencies. In short, Koinly can cover all your needs, no matter what and where you traded crypto. It is one of the most comprehensive solutions on the market and calculates almost all types of taxes. You can generate capital gains reports using 5+ years of historical market data for over 6000 currencies. It also supports creating tax reports for other kinds of crypto income: from mining, staking, or gifts. Koinly takes into account even lost/stolen coins and helps you deal with tax reports for such cases. Koinly can handle margin trades on a number of exchanges such as BitMex, Bybit, Binance Futures, Bitfinex & others.
ZenLedger is another established crypto tax software that comes with a simple and easy to use interface. All major exchanges and currencies (both crypto and fiat) are supported. Just like with other bitcoin tax software, the process of data import is automatic – you just need to integrate Zenledger with the exchanges you were trading on and it does the rest on its own. These reports include capital gains reports, income reports, donation reports, and closing reports. Zenledger platform also provide profit/loss statements for you and your CPA or tax preparer. Zenledger has made sure to format everything in IRS friendly way so the whole process is streamlined all the way to the IRS tax return documents. ZenLedger has three pricing packages, which span from $99 to $299 per year. All pricing options include every feature Zenledger offers: from exchange support, tax reports, and access for your CPA to the platform. The main difference between the packages is the number of transactions by package, which go from 100 to unlimited.
TokenTax is another one of popular calculators for cryptocurrency taxes – it was actually declared as the best one by Forbes online magazin. TokenTax has integration with the broadest range of crypto exchanges – essentially every cryptocurrency exchange worth knowing is supported by TokenTax and you can automatically import your trading data. In case the exchange you used for trading is not supported, you can still simply download your trading data from the exchange and upload it to TokenTax platform. The software will do the rest on its own. By the rest, we mean it will generate all the forms you need to file your crypto taxes. Any file you might need is included, with forms like 8949, TurboTax, FBAR, FATCA etc. Another fact worth highlighting is the prompt and friendly customer support that is always ready to step in and help out with potential snags on the road.
BearTax is is a cryptocurrency tax software that connects with 25 major crypto exchanges to collect all data about your coins and use it to create tax reports. If the exchange doesn’t have public API for integration, you can also import the data in BearTax via simple XLS file. BearTax features a proprietary feature called “smart matching” that matches your withdrawals and deposits across their supported exchanges so you can review it from one single interface. Thanks to this option, you are not in danger of hitting negative balances which could render your tax report invalid.
BearTax offers a number of pricing packages, pricing plans spanning from $0.99 to $199.99 per year. All packages come with a chat support, support for unlimited exchanges, gain loss summary, download tax forms, view itemized data, and full tax year availability. The differentiator between different pricing plans is the number of transactions each of them supports, which ranges from 20 on the low-end to unlimited on the largest package.
BitcoinTaxes was launched back in 2014 and is currently one of the most popular tax calculation tools for the world of crypto. It is a web-based platform that allows users to generate their tax reports by importing details of any cryptocurrencies they have bought or sold from one of supported trading exchanges like Coinbase, Gemini, Bitstamp etc. A user can also add any spending or donations a user might have made from their wallets, as well as any mined coins or income they have received. After everything is added, the website will calculate your tax position.
The application will calculate the following:
- Your Capital Gains Report which will detail every transaction’s cost basis, sale proceeds and gain
- Your Income Report which will also have all the mined values calculated in
- Your Donation Report which will have the information about your gifts and tips
- Your Closing report which will show your net profit/loss and cost basis for going forward into the next tax year
You can enter your capital gains details straight into a tax software like TurboTax of TaxACT, attach a statement to your tax return or print it out. The software allows you to choose your method of accounting, giving you the choice between LIFO, FIFO, average costing and compare like-kind methods. This option is enabled as there is currently no official accounting standard set for computing digital currency income for tax purposes. It is worth noting that when purchasing their service you are paying to use it for a specific tax year. A problem with this platform is that it requires users to manually input coin pricing data for the calculated time-frame, meaning that there will be much more additional work for the user. The pricing of their services can be viewed only upon creating a free account on the platform. The service is currently available for crypto enthusiasts from US, Canada, Australia, Germany and United Kingdom.
Blox is a tax app that gathers data from all of your wallets and exchanges to report in real-time about all your assets. It is great for all kinds of users – from accountants, traders, miners, funds, and VCs. Pricing plans: Free – $249 per month.
Lukka is formerly known as LibraTax, is another popular tax software that is often recommended by crypto enthusiasts. Launched in 2014, the California-based company has just recently expanded into blockchain related services. Marketed as “the leading crypto accounting solution for individuals”, the platform tracks your crypto activity, reports taxable events and establishes cost basis for calculating capital gains and losses.
The platform automatically synchronizes with wallets from all major exchanges such as Coinbase, GDAX, BitStamp, BitGo and shows all of your cryptocurrency transactions in a spreadsheet format. Cryptocurrencies like Ethereum, Bitcoin, Bitcoin Cash, Monero, Litecoin, Zcash, Ripple + 3700 others are supported by Lukka. The platform generates reports on acquisitions, disposals, balances, tax lots and US Tax Form 8949. The basic Lukka package is DIY and costs $19.95 regardless of transaction volume. The LukkaTax Professional is an assisted version that costs $39.95, with no limit for transaction number.
LukkaTax supports different types of crypto transactions:
- crypto trades (crypto/fiat pairs, crypto/crypto pairs, including margin/shorting),
- transfers (on/off blockchain, sometimes labeled withdrawals or deposits in transaction files),
- airdrops (often resulting from forks),
- income (from mining, staking, interest, etc)
Coinbase tax calculator tool
Back in March, the much maligned and government pressured exchange Coinbase, in what was perhaps an attempt to get the tax hounds off its back a bit, decided to encourage its users to start filing their own taxes by releasing in-house built tax reporting tools. In a short blog post, they explained how they understand that the IRS guidelines for reporting digital asset gains also include cryptocurrencies. Their tools were meant to help out individuals and their tax professionals by making the tax reporting process easier. Among those tools is a tax calculator tool.
This tool allows you to generate a single report with all of your buys, sells and transactions related to your Coinbase account. Transactions with payment reversals wont be included in the report. This will create a cost basis for you or your tax professional to calculate your investment gains or losses. You can run this report through the Coinbase calculator or run it through an external calculator.
The Coinbase points out that there is no actual standard set by the IRS on how to calculate your taxes for digital assets. They recommend one of two most commonly seen approaches: FIFO or SpecID. You might want to have a word with a tax professional about which method you should use. The Coinbase calculator tool uses the FIFO accounting method to provide a preliminary gain/loss calculation on it’s users taxes.
The tool won’t cover the cases where user:
- Bought or sold digital assets on another exchange
- Sent or received digital assets from a non-Coinbase wallet
- Sent or received digital assets from another exchange (including GDAX)
- Stored digital assets on an external storage device (i.e., Trezor, Ledger, etc.)
- Participated in an ICO
- Previously used a method other than FIFO to determine your gains/losses on digital asset investments
How to pick the best crypto tax software?
To be honest, all the above listed crypto tax tools are pretty similar. They obviously studied the market and made sure to deliver everything the users need and what their competitors have as well. The pricing structure is also in the same ballpark so in the end, choosing the best crypto tax software will come down to personal preferences and minor details you like or dislike about certain cryptocurrency tax software.
Conclusion: What is the best cryptocurrency tax software?
Luckily for the crypto traders, this segment of the crypto world matured quickly and we have a plethora of excellent options to take care of our taxes. You won’t go wrong with any of the tools we listed above as they pretty much all offer similar quality of service and are in the same ballpark in terms of cost. In the end, a personal preference will be the deciding factor for most people.
How do I report crypto gains?
Form 8949. A majority of investors own crypto as capital assets, and use “Sales and Other Dispositions of Capital Assets, Form 8949” to report all their individual crypto transactions. …Form 1040 (Schedule D, Capital Gains and Losses) … Form 1099-K (Payment Card and Third Party Network Transaction)
If the same trade took place over a two-year timeline, long-term capital gains taxes correspondneymar to one’s tax bracket are applied. This is 0% for those in the 10-15% income bracket, 15% for those in the 25-35% income bracket, and 20% for those in higher brackets.
Article Produced By
Torsten Hartmann has been an editor in the CaptainAltcoin team since August 2017. He holds a degree in politics and economics. He gained professional experience as a PR for a local political party before moving to journalism. Since 2017, he has pivoted his career towards blockchain technology, with principal interest in applications of blockchain technology in politics, business and society.
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