The investments that you make (and sell) have a direct impact on the level of difficulty you will experience when you file your taxes next tax season. But while there’s a myriad of tax tools for mainstream investments, those who have invested in cryptocurrency at any point during the past year may not have a clue how to begin reporting this to the IRS. The good news? There are resources out there to streamline your tax reporting needs for crypto. Let’s take a closer look at crypto tax software and what benefits it has to offer while doing your crypto taxes.
Specialized crypto tax software is designed with current rules in mind.
Take a moment to think about how you do your regular taxes. If you’re like most people, you rely on tax software like TurboTax or tax professionals like CPAs to report your income for the tax year. So, why wouldn’t you do this for your crypto taxes? The reality is that filing a tax return on digital assets is not the same as fiat income. Crypto can be taxed as both income (airdrops, mining, business) and capital gains or losses. With the right software, you can ensure that you’re working with a resource that understands current tax law and knows how to properly calculate your current tax liability.
With that in mind, what crypto tax software is considered to be the best when you do need to file your taxes? Some of the top platforms include Koinly, CryptoTrader.Tax, and BearTax. Given that the industry is continually expanding to meet the needs of traders and casual investors, you also have options like TaxBit, CoinTracker, TokenTax, and Accointing, just to name a few. Regardless of what your budget is, which cryptocurrency exchanges you use (Coinbase, Gemini, etc.), or how many cryptocurrency transactions you make per year, you’re sure to find software that works for you. Your crypto tax report is just a click away!
Tax software for crypto is designed to save you time and money.
Taxpayers want to make sure that the reporting process is seamless and beneficial to them. Unlike other investments, there are actually multiple reporting methods for your cryptocurrency taxes that can reduce your crypto gains and help you minimize taxable events for reduced tax liability. While not all cryptocurrency tax software will calculate crypto transactions in the same way, the top reporting methods include First In, First Out (FIFO), Last In, First Out (LIFO), Highest In, First Out (HIFO), and the Specific Identification Method. With the support of comprehensive crypto reporting software and external support from a tax expert, you can save a lot of time and save more of the virtual currency profits you realized from cryptocurrency gains.
Modern software is compatible with mainstream wallets to calculate transactions for you.
If you’re a trader worried about keeping your investments on different exchanges, your money may be flowing back and forth from top exchanges to your favorite crypto wallets. This complicates things because your digital currency is being stored and traded in multiple locations. Having to track initial purchases and income earnings to the final sale of specific crypto purchases can be a massive pain. The good news? Today’s crypto tax software can work with both top exchanges and mainstream wallet solutions to categorize transactions and integrate them into one central software so that it’s easier to report your capital gain and losses.
If you trade crypto, the last thing that you want to have to do is tackle tax reports by yourself and worry about audits later. Instead, discover the benefits of crypto tax software and find your favorite platform using the suggestions above!