Crypto is like any asset, is 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 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 look at a tool that makes all that more straightforward and almost hassle-free, crypto tax software.
What is Crypto Tax Software?
Crypto tax software is an excellent way of tracking taxes and accounting. It makes organizing your transactions for tax reporting easier and faster. 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 gives investors a better view of their holdings 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 many more options.
What To Look Out For In A Crypto Tax Accounting Software
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:
Your Crypto Tax Software Should Have “Automatic Imports”
What makes crypto software so convenient is that it allows for a seamless import of trading history from wallets and exchanges. Not having to manually write in every single time you’ve sold and bought crypto is game-changing, and it’s 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 is not yet integrated with more advanced DeFi applications such as yield earning vaults, so it’s best to do your research.
Be Sure It Has A: Tax Loss 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 reduces 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 excellent as it could 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 services like Results Tax Accountants can help save money in taxes, reduce stress/anxiety and save you a lot of time.
Don’t Overpay For Crypto Tax Software
Crypto tax software usually offers a free version with minimal transactions and a tier-based system with different rates depending on how many transactions, including transfers, staking, and mining rewards, are recorded. For the complete version, crypto tax services generally charge $200 or more yearly. Note that transfers, staking, and mining rewards are considered transactions, so cheaper tiers may not be enough for some users seeking comprehensive coverage. Explore the landscape of crypto tax solutions and ensure your financial activities are accurately accounted for, whether you’re managing transactions, staking, mining rewards, or exploring the option of an instant crypto loan.
What Type Of Customer Support Do They Have?
Taxes are complicated stuff, even with tax software that does most of the job for us. Even so, good customer service that’s always ready to assist us is needed for a smooth and productive user experience. Tax software offers varying degrees of customer service, but you’ll usually have to pay more for advanced services.
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.
The best crypto tax software is essential for any trader taking his craft seriously. Fortunately, there are many good options, 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.
Stephan Knight is a nationally recognized, veteran Crypto Tax Accountant veteran with 20+ years of experience in accounting. He currently works at Results Tax Accountants, a firm specializing in helping individuals and businesses with their Cryptocurrency tax and accounting needs. He’s also a co-author of the FREE Crypto tax and accounting blog at www.ResultsTaxAccountants.com/blog
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