When it comes to taxes on crypto, the Internal Revenue Service (IRS) classifies Bitcoin and other cryptocurrencies as property.
Therefore, the general tax principles that apply to property transactions such as stocks and shares, also apply to taxes on crypto. And as a result, the IRS holds all crypto investors and traders responsible for reporting their crypto tax.
In fact, the IRS has been actively moving to crack down on crypto tax evaders. A case in point being, the IRS form 1040 which taxpayers use to file their annual income tax returns.
The IRS altered the 2020 version of the form to include a disclosure about crypto assets. Moreover, the placement of the question on the first page of the form is seen by many as a strong warning to those who are not complying with tax laws.
Furthermore, failure to report income from virtual currencies can result in additional interest, fines, and in some cases criminal prosecution.
How is crypto taxed?
Firstly, laws of cryptocurrency taxation vary depending on the country.
However, when it comes to US crypto tax reporting, cryptocurrencies are classified as capital assets and taxed as ordinary income.
This means that cryptocurrency users must report all transactions involving virtual currencies as US dollars on their tax returns.
Therefore, according to the IRS, the following are crypto taxable events.
- Selling crypto for FIAT, i.e., realizing profits.
- Converting one crypto into another. For example, using Bitcoin to buy Ethereum.
- Paying for goods or services.
- Income from mining crypto.
- Earnings paid in crypto.
- Rewards received through staking and airdrops.
Top 5 Crypto Tax Platforms
As you can imagine, it can be very challenging to keep a detailed record of USD gains and losses on all cryptocurrency transactions.
Luckily, there are a number of leading crypto tax platforms out there to help you keep track of your taxes.
Let’s take a look at the 5 best platforms for crypto taxes.
Cryptotrader is widely recognized as the best crypto tax solution. The platform integrates with all major exchanges and generates your tax returns with the click of a button.
Users simply have to import their transaction history through exchange API and the platform’s automated technology will take care of the rest.
In addition, reports provide a full audit trail so that in the event of an audit, investigators can easily verify the accuracy of your taxes.
Cryptotrader has four tiers of pricing based on transaction volume. And in the unlikely event, you are not satisfied with your tax report, Cryptotrader will provide a full refund of your payment.
The platform even comes with international tax support and can be used for any country that supports FIFI, LIFO, or specific identification methods.
All in all, it’s easy to see why Cryptotrader is the go-to platform when it comes to calculating taxes on crypto.
And as an added incentive, new customers can receive a 10% discount when they subscribe below.
Cointracker is an easy to use platform that accurately tracks your entire crypto portfolio and instantly generates tax reports.
The connectivity on Cointracker is second to none and the platform supports virtually every exchange. Therefore, users can easily connect all exchanges, wallets, and DeFi platforms to synchronize their crypto balances and transactions.
Cointracker offers 25 free transactions so new users can try out the platform. In addition, there are three paid packages, each with a 30-day money-back guarantee.
When it comes to tax jurisdictions, Cointracker currently supports the accounting standards of the US, UK, Canada, and Australia.
To sum it up, if you are looking to combine a portfolio tracker and crypto tax calculator then Cointracker should be top of your list. Each plan comes with an unrivaled host of features to easily keep track of your portfolio and crypto taxes.
Koinly is a top-notch crypto tax platform that monitors all your crypto activities and generates tax reports on demand.
And since the platform integrates with over 6,000 blockchains, it can automatically import transactions and keep track of activities such as trading, staking, mining, lending, and airdrops.
The platform provides crypto tax support for over 20 countries and has offices in the US, UK Sweden, and Germany.
The free plan comes with everything you need to test the platform. You get unlimited wallet and exchange accounts to track all your transaction activities and it also provides a capital gains tax preview.
On the whole, Koinly is competitively priced and provides a range of premium features to keep track of your crypto earnings.
Zenledger’s crypto tax software is a popular solution that provides a broad coverage of crypto exchanges and DeFi platforms.
In addition, Zenledger has partnered with the #1 best-selling tax preparation software platform TurboTax. This means users have access to traditional tax calculators and can report taxes on crypto directly to the IRS.
The software comes with 4 flexible plans and you can try it for free. Nevertheless, to use DeFi, staking, and margin trading features will require a premium or executive plan.
What sets Zenledger apart from other crypto tax software solutions is its ease of use. The simple interface is feature-rich and provides an intuitive user experience.
BearTax’s crypto tax software provides seamless integration with over 50+ leading exchanges to make paying taxes on crypto easy and painless.
The platform is user friendly and provides an all in one solution to filing crypto tax returns. In fact, everything you need for your tax returns can be done in a few simple steps.
BearTax offers a trial in which you can input and preview your information for free. However, you will have to sign up for a plan if you want to generate tax documents.
The platform provides local tax support in the USA, Canada, Australia, and India.
Altogether, BearTax is a comprehensive crypto tax platform that comes with an extensive list of tools at a reasonable price.