Settling up with the IRS at tax time can be complicated if you’ve been doing a lot of cryptocurrency trading.
Gains from sales of digital assets can be subject to capital gains tax. Unlike stockbrokers, even the best crypto exchanges aren’t always required to file tax forms summarizing your annual activity. It’s on you to figure out what you netted last year and what that means for your taxes.
Generally, these programs use data from your exchange to compile records of your profits and losses.
A key feature of crypto tax software is generating an IRS Form 8949 based on your records. This document is used to report sales of capital assets, and it is different from the form a stockbroker might send you cataloging your equities sales in the past year.
Crypto tax software providers also tend to offer a suite of other reports and services depending on your needs. Notably, most of the leading products help with tax-loss harvesting, which can help you reduce your taxes when you sell investments for less than you paid.
When choosing a crypto tax software, there are a few questions to ask:
Does it connect directly with your crypto exchange? Many providers generate reports by connecting directly to major exchanges and pulling the data. However, not every software connects to every exchange, and if yours doesn’t match up, you may have to download data from your exchange, then upload it on your own.
Does it work with your tax preparation program? Crypto tax software can often interface directly with the computer programs that help you file your tax returns. While connectivity with TurboTax is typical, other programs have more sporadic coverage.
How many trades did you make? Depending on the volume of trades, some platforms offer tiered pricing they’re helping you analyze. So a quick look at your trading history could help you figure out which is the most economical option.
Do you have income from decentralized finance (DeFi) applications, staking or nonfungible tokens (NFTs)? Not all providers include these types of transactions in their basic service.
Do you need crypto tax software at all? It’s possible that you could get by with the offerings laid out by your existing tax software provider. TurboTax, for instance, says it can import data directly from some of the leading cryptocurrency exchanges.
If you decide you need dedicated crypto tax software, webtradetalk.com examined some of the leading products in the market.
5 crypto tax software programs to consider
Crypto tax software programs at a glance
Free, though plans with tax form downloads start at $49 per year.
TurboTax, TaxAct, H&R Block.
CryptoTrader.Tax, which is in the process of rebranding under the name CoinLedger, orients its pricing solely around the number of transactions you plan to use it for. Plans range from $49, for up to 100 trades, to $299, for unlimited trades.
Beyond that, every plan offers several tax forms, support for DeFi income and live chat support. CryptoTrader.Tax says it has software integration with TurboTax and TaxAct. The service says it also connects to more than 120 exchanges.
Koinly offers a free trial for up to 10,000 transactions. The catch is that you’ll have to pay $49 to download many types of reports. Plans range up to $179, which is the only tier at which Koinly offers support via email; otherwise, you can try its chat service. Koinly offers support for staking and other types of crypto income, says it works with 350 exchanges and integrates with H&R Block, TaxAct and TurboTax.
TaxBit similarly starts with a free plan that does not allow you to download tax forms. Its basic paid service is $50, which gets you unlimited transactions, live chat support and tax tools for NFTs and DeFi transactions. Its pricing ramps up pretty quickly. For instance, tax-loss harvesting is not available below its $175 tier. But that money also unlocks “concierge” support in uploading crypto transaction records, as well as additional tools for handling NFTs. And $500 pays for a CPA review and IRS audit support if needed.
TokenTax has some of the pricier options on the market, but it also offers some unique services for higher-paying customers. Unlike many of its competitors, it does not advertise a free trial.
Plans begin at $65, and that tier offers up to 500 transactions but only supports automated connections with Coinbase and Coinbase Pro. At $199, plans offer tax-loss harvesting and NFT and DeFI integration, with up to 5,000 transactions from all exchanges. Offerings increase up to $3,500, which pays for a CPA to help you with your crypto taxes. All plans include live chat support and TurboTax integration.
ZenLedger’s pricing structure turns heavily on the volume of transactions you intend to process. If you’re just an occasional trader looking to process 25 or fewer transactions, ZenLedger’s free version might meet your needs. Plans starting at $149 have support for NFTs, DeFi and staking. And $399 buys unlimited transactions. In a notable departure from many competitors, all of ZenLedger’s plans offer premium support, including chat and phone. All plans also include TurboTax integration.
Disclosure: The author held no positions in the aforementioned investments at the original time of publication.