Crypto tax calculators are essential for every trader, and throughout this article, we will cover the best crypto tax calculators and talk in-depth about crypto taxing.
In 2014, the IRS decided to treat cryptocurrencies like stocks and bonds rather than currencies like dollars or euros. Therefore, your assets of crypto are taxed whenever they’re sold for profit.
At the end of each tax year, you have to calculate your taxes. Moreover, you have to fill different forms depending on your country’s taxing system. Fortunately, you can automate the whole process nowadays by using smart crypto tax calculators that assist you and save you tons of time.
Koinly
Automatically imports your transactions, finds all the market prices at the time of your trades, calculates your crypto gains/losses and generates your tax reports!
Coinpanda
The world’s most reliable and easy-to-use tax solution for cryptocurrencies. File your tax return in under 20 minutes.
Available in 65+ countries
TokenTax
Connect major exchanges like Coinbase, Binance, and BitMEX with automatic API import, or upload a trade history CSV from any exchange.
Accointing
Accointing is the accounting, tracking, and tax optimization tool for Bitcoin and other cryptocurrencies. They are a team of passionate blockchain investors and believers that have come together to create the most comprehensive and simple-to-use taxes and tracking tool in the blockchain space.
Recap
At Recap, they have created a powerful portfolio manager for Bitcoin and all cryptocurrency that automatically calculates your crypto tax position.
CoinTracking
CoinTracking is the first cryptocurrency tax reporting tool and portfolio manager. CoinTracking started with the goal of making cryptocurrency traders’ lives easier – not only during tax season.
Cryptotrader Tax
The most accurate and reliable DIY tax prep software for crypto investors. With over 12 billion dollars in transaction volume and partnerships with leading consumer tax software platforms.
BitcoinTax
Bitcoin.tax is the leading capital gains and income tax calculator for Bitcoin, Ethereum, Ripple, and other digital currencies. Bitcoin Taxes has provided services to consumers and tax professionals since its launch in 2014.
CoinTracker
CoinTracker enables seamless cryptocurrency portfolio tracking and tax compliance as the adoption of cryptocurrency continues to pick up and more exchanges, wallets, and DeFi products are built.
ZenLedger
Built by expert industry veterans in technology, finance, and accounting, ZenLedger allows you to easily import crypto transactions, calculate gains and income, and prepare your tax returns.
BearTax
Software for traders & accountants to pull trades from every exchange and generate tax documents within minutes. Free income statement & free gain-loss preview.
Blockpit
Blockpit has been dealing with the topic of compliance with cryptocurrencies. They have developed a software platform that combines all crypto sources to simplify processes resulting from complex regulations and tax laws.
Lukka
Lukka is a team of top-performing data experts transforming post-trade blockchain data into easy-to-use information for business operations. Lukka is the first back-office crypto-focused technology company to receive AICPA SOC 1 Type 2 and SOC 2 Type 2 certifications.
Node40
At Node40, they sit at the intersection of industry and government compliance to demystify cryptocurrency treatment (e.g., Bitcoin) across its many governing bodies.
Crypto Tax Calculator
Crypto taxes can be painful, but with Crypto Tax Calculator, a simple and easy-to-use tool, you can prepare your taxes in a matter of minutes. Over 500 integrations with support for complex scenarios such as DeFi & NFTs.
IRS Definition of Cryptocurrency.
The IRS defines cryptocurrency as follows:
“Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and a store of value other than a representation of the United States dollar or a foreign currency.”
What Are Crypto Tax Calculators?
Crypto tax calculators are tools that retrieve data from your wallets or exchanges. Afterward, it computes your profits, losses, and income based on that data. However, you can still manually input your data for calculating. After computing your data, crypto tax calculators offer fantastic features like filling your forms or importing your taxes into other integrations like TurboTax for further processing.
Most crypto traders use crypto tax calculators to automate their crypto tax reporting. Therefore, if you’re an active trader or even a usual one, you should consider using crypto tax calculators.
How Does Crypto Tax Calculators Work?
Crypto tax calculators work in several ways. The first one and the easiest and most reliable is connecting your exchange or wallet through an API key or public address. Then, the crypto tax calculator will download your data and start calculating your taxes.
The second way is uploading your transactions as a CSV file. AI will process your data and generate your taxes form as well.
The third way is manual entry. Start entering your transactions one by one, and then the crypto tax calculator will process your entered data. But this option is unlikely to be used as it can take much time and effort; it’s always better to find a calculator that supports any of the previous methods at least.
Is It Safe to Connect Tax Calculators to Wallets or Exchanges?
Yes. As tax calculators are connected to exchanges through API codes, you’re the one who controls permissions granted with every API key you generate. Your assets will remain on your exchange.
Also, tax calculators can connect to your wallet through your wallet’s public key which is totally safe.
Furthermore, most companies nowadays (If not all) encrypt your data on servers to ensure more security. We highly recommend reading about the platform’s security measures before using it.
What to Look for in A Crypto Tax Calculator.
There are a few attributes that make a huge difference. Look for the following points in the platform before paying for their services.
Security: First thing to look for in any crypto-related software is security. Check out the platform’s help center and read about their security and user data protection.
Country Support: Different countries have different taxing laws and different taxes forms. therefore, you should make sure that your country is supported by your tax calculator.
Supports CSV: CSV format is widely used, especially with taxes; therefore, your crypto tax calculator should allow uploading, viewing, and editing of CSV files. Also, you should be able to export your data in CSV format.
Supports IRS forms: Your crypto tax should be able to generate different IRS forms such as form 8949 for U.S. filing in addition to international gain and loss reports.
Works with TurboTax and TaxAct: The previously mentioned software is very helpful and can come in handy when generating your taxes. Try looking for a crypto tax calculator that supports TurboTax and TaxAct.
Integration: As we mentioned earlier, a crypto tax calculator imports your data through an API key or a .CSV file. It’s always better to get a calculator that supports both.
What Are Crypto Taxing Events?
Under U.S tax law, some events make your taxes apply to your crypto once those events happen. But, firstly, let’s exclude the event when you buy crypto and hold it. Because if you didn’t trade your crypto and just held it, you don’t need to pay taxes.
Accepting crypto as payment: If you accept crypto as a payment you need to pay taxes.
Crypto mining: Miners pay taxes depending on the scale of their earnings.
Trading: Suppose you traded with your assets. Therefore, you must record your capital gain or loss as you’ll pay taxes for it.
Countires That Don’t Tax Crypto.
There are few countries that do not tax cryptocurrency at any even; therefore, you do not need a tax calculator at all. The crypto-friendly countries are:
- Belarus
- Germany
- Hong Kong
- El Salvador
- Malaysia
- Malta
- Portugal
- Singapore
- Slovenia
- Switzerland
- Bermuda
- United Arab Emirates
But unfortunately, if you’re living outside one of the previous countries you have to pay taxes depending on your country’s laws.
Crypto Tax Forms.
The form you should be using depends on your country. Make sure to check your country’s laws; here are some international accounting methods:
- First in, first out (FIFO)
- Last in, first out (LIFO)
- Highest in, first out (HIFO)
- Adjusted cost base (ACB) – Canada
- Share pool – United Kingdom
And for U.S residents, these are the most important forms that your calculator should support:
- Form 8949 (used for cryptocurrency capital gains and losses)
- The Form 1040 Schedule 1 (used to report income made in crypto)
What is FIFO vs LIFO?
FIFO and LIFO are short-hand names for inventory systems. In a FIFO system, inventory is sold on a first-in, first-out basis. In simpler words, this means the older stock is sold first. But in a LIFO system, the last in is the first out.
The same with cryptocurrency. That’s why most traders use the FIFO system, selling their oldest crypto first because that offers lower taxes as it allows you to sell long-term assets before short-term assets and long-term gains have lower taxing rates.
Is Transferring Crypto from A Wallet to Another Taxable?
It depends, if you’re transferring assets from a wallet of your own to another wallet of your own, it’s not taxable. But, if you are transferring assets to someone else, you need to pay taxes because the IRS views this as a sale.
How to Choose A Tax Calculator.
There are many aspects to decide which tax calculator fits you the most. Firstly, which forms are you looking to generate? And what accounting methods does the tax calculator use? As countries use different account methods, you need to find a tax calculator that supports your country’s accounting method.
Secondly, what type of trader are you? Because crypto tax calculators charges per tax season, you need to find a tax calculator that provides the best price in addition to supporting your country’s accounting method.
How to Reduce Taxes by Considering Losses?
When filing your tax return, you have a few options if you have a loss. Losses in crypto can offset other capital gains, or you can carry forward the losses to future years to offset gains in crypto or other capital gains.
You can also subtract up to $3,000 of your losses from your income. If you deduct $3,000 from your income but have more losses than that, you can still carry the rest of the losses to deduct from future years or offset future gains.
Crypto tax calculators can automate that process for you and display opportunities to lower your taxes.
Cryptocurrency Tax Calculator Alternatives.
If you don’t want to use a tax calculator for whatever reason you have, there are alternatives that you can go to.
Firstly, you can hire a tax lawyer versed in cryptocurrency taxes. But the disadvantage of this option is that it can cost a lot; also, there can be a human error.
Another option you have, you can calculate your own taxes; however, that requires prior knowledge and it can be very tricky and time-consuming.
Conclusion.
Crypto tax calculators are essential. You don’t need to spend hours calculating taxes anymore when you can automate it. Furthermore, with tax calculators, you can eliminate human error from your taxes calculations.
It would be best if you started using a crypto tax calculator as it’ll help you focus on growing your business the most. And here’s what we think of crypto tax calculators as pros and cons:
Pros.
- Saves a lot of time.
- Displays savings opportunities.
- Supports most if not all forms needed for crypto taxing.
Cons.
- Can be pricey if you make enormous amounts of transactions per tax year.
Finally, we’d love to chat with you in the comments. So tell us, What do you think of crypto tax calculators? And are you planning to use any of them?
