Crypto is like any asset, taxable by the government. When you sell your coin, you’ll incur a capital gains tax, however, the laws regulating this type of taxation can be very complex and vary from country to country. These taxes depend on criteria such as the length the asset has been held, or how much of it has been sold.
There are a few exceptions to these rules, some crypto-friendly countries such as Belarus, Slovenia, and Portugal have no capital gain tax for crypto assets. Today, we’ll be looking at a tool that makes all of that easier and almost hassle-free, crypto tax software.
What is Crypto Tax Software?
Crypto tax software is a great way to make tracking taxes and accounting a lot easier. Investors avoid all the common pitfalls of doing it manually by simply relying on software to do it for them.
Good crypto tax software includes a crypto portfolio tracker that allows investors to have a better view of their holdings, all from one interface. For anyone serious about trading crypto tax software is a must, it saves you countless hours as it automates all the hours of learning tax code, potential changes in the law, and human error.
How Does Crypto Tax Software Work?
Crypto tax software automates the accounting process and calculates how much is due. All the user has to do is insert the needed data and the results will be given to him.
The software calculates all the taxes in specific jurisdictions, automatically imports your trades from exchanges and wallets, and offers a lot more options.
What To Look Out For In A Crypto Tax Software
Having good crypto tax software is essential, so you should always research what you are getting into. The priority should be finding an easy-to-use and accurate crypto tax software, here’s what you should look out for:
Automatic Imports
What makes crypto software so convenient is that they allow for a seamless import of trading history from both wallets and exchanges. Not having to manually write in every single time you’ve sold and bought crypto is game-changing, and it’s probably the best reason to use tax software.
So always check if the crypto tax software supports the platform on which you exchange your coins. Keep in mind that some software’s are not yet integrated with more advanced DeFi applications such as yield earning vaults, so it’s best to do your research.
Tax Harvesting Feature
Tax harvesting is a method used to lower how much tax is owed at the end of each year. Investors report a loss, and in some cases, this lowers your income tax obligation. Some crypto tax software helps users see if it’s convenient to trigger this accounting event and report a capital gain loss. This function is not available in all crypto tax software but is great to have as it could potentially save you money at the end of each year.
Use the services of a crypto tax accountant to avoid costly tax and crypto accounting mistakes when applying tax loss harvesting or any other tax planning strategy. A crypto accountant can help save money in taxes, reduce stress/anxiety and save you a lot of time.
Pricing
Crypto tax software usually offers a free version with very limited transactions and a tier-based system with different rates depending on how many transactions are recorded. For the complete version crypto tax services generally charge $200 or more a year. Keep in mind that transfers, staking and mining rewards are considered transactions so cheaper tiers may not be enough for some users.
Customer Support
Taxes are complicated stuff, even with tax software that does most of the job for us, that’s why good customer service, always ready to assist us if needed is great to have. Tax software offers varying degrees of customer service, but you’ll usually have to pay more for deeper insights.
Help from real-time tax professionals is also sometimes offered on crypto tax software, but as you can imagine it will cost you a lot.
Users should look up the tax software service with the best price/benefit customer service that fits their needs.
Conclusion
Having good crypto tax software is essential for any trader taking his craft seriously. Fortunately, there are tons of good options out there, such as Koinly, CryptoTrader.Tax, BearTax and TaxBit. Each offers a different set of services with its pros and cons, so it’s up to individual users to pick what suits them best.
Mark Robert
