Tax day is coming but it doesn’t have to be such a headache with the help of tax accounting software that can streamline your crypto trades reporting.
According to Uncle Sam, cryptocurrency is classified as property so counts as a capital asset and is thus eligible for taxation. As a result, tax season can cause panic among crypto holders who are dreading tracking down all their trade and holding details to stay above board.
With over $14 trillion in crypto trading volume in 2021, there will be a significant amount of paperwork to be completed, and amidst a rockier than usual tax season, the IRS means business about collecting every penny owed. In fact, as of 2023, crypto tax reporting will be mandatory.
Whether you joined in on the hype of crypto in 2021 and this is your first experience navigating crypto taxes or you’re an OG who’s always shopping around for the best software on the market, you’re in the right place.
There are tons of options on the market today with different specializations, from general crypto to NFT (or non-fungible token)-specific features. To help you navigate your options and choose what’s best for you, in this guide, Metaverse Land Club has compiled all the best tax software, ranked by utility, features, affordability, etc. Let’s begin.
What to Know About Cryptocurrency and Taxes
The laws and regulations around cryptocurrency internationally are less than clear, and the same is true of the United States. As regulation ramps up and crypto laws change, how and when crypto is taxed will undoubtedly shift. However, here’s what you need to know based on the best information out there:
Per this IRS guide, crypto counts as property. As a result, converting that property to fiat currency or other digital currency results in a capital gain or loss. Consequently, you’ll have to pay capital gains taxes on that profit.
For example, if you receive a salary or payment in crypto, it counts as a taxable event, and the IRS will use the fair market value of the crypto in USD the day you received it for payroll tax calculation and federal income tax purposes.
NFTs and Taxes
If you’re someone with a portfolio full of NFTs, you may be wondering what tax season means for you specifically. In the United States, art and crypto are essentially treated the same way under tax rules. Both art and crypto are considered property by the IRS so NFT sales count as taxable events, and thus, you’ll need to pay taxes on each trade. To do so, you’ll calculate gain/loss based on the difference between your sales process and cost basis. You will also need to take into account your holding period for the NFT. Simply put, NFT sales are treated as trades.
Furthermore, if you’re an NFT creator who sells your NFTs for profit, you will likely need to treat each sale as a sale of inventory. Thus, all of your sales proceeds will be treated as ordinary income because there’s no cost basis for self-created art. As a creator, you may also be able to deduct your business expenses.
Overall, NFT taxation is still a nascent area so you should strongly consider seeking out professional help that can work with you in your unique situation as either a creator or investor (or both).
Taxable vs. Nontaxable Crypto Events
Crypto and tax law is complicated (hence the need for simplifying crypto tax software), but here’s a basic rundown of the taxable events you’ll need to report on your tax return:
- Selling crypto for fiat
- Making purchases with crypto
- Exchange one crypto for another
- Receiving crypto for your goods or services
- Earning crypto from lending programs, investment programs, or stacking
- Receiving crypto from mining, airdrops, or hard forks
- Investing in Initial Coin Offerings (ICOs) or Security Token Offerings (STOs)
- Engaging in crypto margin trades, arbitration, or hedging
- Receiving crypto from gaming, gambling, social media upvotes, or crypto faucets
- Sending crypto as a gift when the fair market value (FMV) of the crypto at the time of the gift exceeds the annual gift exclusion amount
While this is certainly a long list to keep in mind, not all crypto transactions require taxation. Here are the crypto transactions you don’t have to report:
- Buying crypto with fiat
- Holding crypto in your wallet or exchange
- Transferring crypto from one wallet or exchange to another
Receiving crypto as a gift is a taxable event only in some situations, depending on the unique circumstances. Lastly, donating crypto to a charitable organization is not taxable but it is reportable as you may be able to claim a deduction at the federal or local level on your return.
How Crypto Tax Software Can Help
With the complexity of crypto taxes, it’s imperative to be organized and accurate, and thankfully, there are plenty of tools that can help. Crypto tax software is one such digital tool that helps you calculate the taxes you or your business owe on investments and transactions. Tax professionals will often use complex crypto software but today, there is a wide range of tools geared toward helping non-professionals file their taxes correctly.
How Does it Work?
Rather than manually enter your trading history, tax software allows you to easily import your trades and generate reports that can be uploaded into whatever software you use to complete your typical taxes. These reports will give you a rundown of your total capital gains or losses and typically are exported in the form of IRS Form 8949 (Sales and Other Dispositions of Capital Assets).
This saves you time as well as the headache and worry of making any errors. Tracking your transactions and paying the appropriate taxes accurately is crucial to avoiding any penalties from the IRS. As cryptocurrency’s use grows, the use of this software has grown as well. For a few extra dollars, an investment in a savvy accounting tool will pay off in the long run.
Factors in Choosing the Right Crypto Tax Software for You
As you’re choosing the right crypto tax software for you, it’s important to weigh the features you need in your solution. Some tools have all the accoutrements a professional accountant or extensive crypto trader may need, while others have basic options that could meet your needs. The right software for you will balance what you need while keeping you compliant without too much headache.
Here are some considerations to keep in mind this tax season:
- Your level of trade activity
- Exchange support
- Frequency of use
- Coin tracking
- Data import options
- Backup
- Price
Your Level of Trade Activity
In deciding what type of software is best for you, it’s a smart idea to look back at your year of trades and categorize yourself: as a casual occasional trader, career power trader, or diversified crypto master with your assets spread across stablecoins, NFTs, and every category of crypto under the sun.
If you’re a more casual trader, you may be looking for a simple free solution, like Accointing or CryptoTrader. On the other hand, if you deal with thousands of transactions annually, you might want to invest in a service with all the integrations, bells, and whistles, like CoinTracking or the highest tier or another of the providers below.
Exchange Support
Since the majority of crypto exchanges don’t report transactions to the IRS, most crypto holders must fill out a Form 8949 for every trade made that year. This becomes even more cumbersome if you’ve traded on multiple exchanges. As a result, holders with many trades will want to find software that can link to and automatically import this data to simplify the process.
Frequency of Use
On top of considering how many trades you’re making, you should also consider how frequently you plan to file crypto taxes. Software options have both short and long-term specializations so you should choose a tool that makes sense with your needs. For example, if you plan to regularly file crypto taxes from now on, it’s worth considering choosing software that goes the extra mile in terms of features.
Coin Tracking
As coin comes with its own set of tax rules and each software provider has its own list of cryptocurrencies that it supports, it’s important to consider the types of coins in your portfolio. Some software services have tools for certain coins while others use general apps to track coins.
Data Import Options
To save you time, you will want to look for a crypto tax tool that makes it as easy as possible for you to import your transaction data. Programs that automatically import data are the most efficient, while software that requires you to manually input data increases the time burden and risk of error. However, if you only have a handful of transactions, you may not mind doing some input by hand. It all depends on your number of transactions and data sources.
Secure Backup
It almost goes without saying that you’ll want tax software that protects all your sensitive information. You will also want to consider software options that have strong backup systems so that you don’t have to worry about losing all your records from your computer. Tax software with automatic backups gives you peace of mind and security.
Price
The final factor to consider is your bottom line. Since crypto tax software can range from free to hundreds of dollars a month, you’ll need to keep in mind your budget and what you’re willing to pay for your desired features.
Additional Factors for Your Consideration
The above seven factors are the most relevant for most crypto holders, however, there are a few others you may want to keep in mind.
Ease of Use
A user-friendly software system will help you record all of your transactions and avoid negative consequences like a penalty or an audit. This is especially important with crypto because each transaction detail must be captured. The best platforms give you an easily navigable interface and the IRS form you need to file as well as the data you need to accurately complete it.
Crypto to Fiat Conversions
The next thing to keep in mind is that you must report any crypto to fiat currency conversions you’ve made on your taxes. Some tax software services will track this for you, while others do not, so if have a significant number of conversions, it may be worth finding a tool that offers this feature so you don’t miss anything.
Income Tax
Another layer of crypto that you must report on your tax return is any crypto earned from airdrops, mining, or faucets. This counts as income so you’ll need to familiarize yourself with your country’s regulations around reporting crypto income to maintain compliance.
Tax Loss Harvesting
Looking to make use of the popular tax-minimizing technique known as tax loss harvesting? If so, you may want to find a tool that offers features tailored to this purpose as it’s a complex process.
Tax loss harvesting, for those who are new to the term, is the strategy of selling off some of your investments at a loss to offset the gains you’ve realized through selling other stocks at a profit. In doing so, you will only pay taxes on your net profit, which can reduce your total tax bill. It can be a useful tactic but one that it’s important to do right so keep this in mind if you’re planning to do any tax loss harvesting this year.
Exchange Accounts
If you’re active across multiple crypto exchanges, it’s critical to find software that easily imports data from each of your exchanges. Software that does this well will allow you to log in to each exchange account and then watch as your data imports automatically. In contrast, manually adding hundreds of trades across many exchanges is something you’ll certainly want to avoid.
Staking Rewards
Similar to a Proof of Stake mining reward, staking—or the process of users staking their coins to participate or reap rewards—adds to your taxable income. Some tools will give you features to specifically track your staking rewards making it easier for you to ensure it’s correctly reported.
Margin Trading
Margin trading, or borrowing money to carry out additional trades, counts as income. If you’ve been margin trading on an exchange, you’ll need to pay added taxes based on income tax rates. You’ll also need to calculate your additional earnings gained from margin trading when determining your total income. If this is an important factor in your total income, you should look for crypto tax software that specializes in this.
Trading Fees
Another factor you’ll want your tax software to track is any fees you’ve incurred from making any trades or buying crypto at a premium. Most tools will include features that can handle these trading/dealing fees.
Crypto Donations
Crypto donations have been on the rise, and if you’re a donor of any form of crypto to a charity or nonprofit, this must also be reported on your taxes. Most crypto tax tools make it easy for you to track donations, which makes for a simpler process for you. If you’re a regular crypto philanthropist, make sure you find software that will streamline your donation reporting.
Crypto Gifts
On the flip side to crypto donations, if anyone has blessed you with a crypto gift, this may or may not also count as reportable income. This will depend on your situation so be sure to look into providers that help you track gift transactions as not all do.
Crypto Capital Gains/Losses Calculations
Capital gains apply to crypto so as your assets change in value, you’ll need to track your capital gains and capital losses over time. Failing to report this accurately can result in audits, fines, or penalties. Tax software can track this for you and note the capital gains tax on each of your transactions. Note: if you’re planning on doing any charitable giving, by donating in crypto to a charity directly, you don’t have to pay your capital gains taxes (and you can deductions on this gift as well).
Price Fluctuation
Hand in hand with capital gains and losses, as crypto price is inherently volatile, the value of your holdings will shift over time. Thus, you’ll need to track each transaction to report the right details. Thankfully, most tools will track this for you.
Our Top 11 Crypto Software Options
In this section, we’ll take an in-depth look at the top crypto software options on the market for you to browse. We note which are best for what kinds of needs (in no particular order), and in the next section, we’ll break down which software options are ideal for investors with a portfolio full of NFTs.
Looking to choose from just the best-of-the-best? Here are our top three picks for crypto software today, which are consistently ranked highly by users:
Koinly
- Offers excellent free crypto tax reports that are quick and simple to generate
- Supports more than 300 crypto exchanges
- Exports both U.S. and Canadian fax forms
CryptoTrader.Tax
- Gives you a flexible range of options when importing your crypto tax reports
- Reports can be uploaded to TurboTax
- Support for all the major exchanges
ZenLedger
- Offers the best option for simplifying what can be a complex tax process
- Integrates with over 500 exchanges and wallets
- Offers basic NFT and DeFi support with its Premium and Executive plans
CoinTracker
A widely-used option that gives you custom cost-saving advice year-round.
What it Does:
In addition to tracking your portfolio and taxes, CoinTracker specializes in giving you a look into the tax code so you can adjust your cost basis, minimize your tax liability, and increase your profits long term. It’s served over half a million clients.
Key Features:
CoinTracker supports over 300 exchanges and 8,000 cryptocurrencies that you can connect and automatically import. It provides users with an easy-to-use template and a calendar view for transactions as well as a coin breakdown by period. It offers responsive customer support as well as a mobile app that give you a real-time view of your portfolio’s performance so you can make the best, most informed decisions.
Pricing:
CoinTracker offers a free basic package that supports up to 25 transactions. For users with more transaction needs, it offers the following paid plans, which each come with a 30-day money-back guarantee:
- Hobbyist: $53
- Premium: $179
- Unlimited: Individually priced
CoinTracking
Best option for a wide range of features.
What it Does:
CoinTracking is a highly-recommend software with an array of features for both tax reporting and market analysis. You can benefit from its trend-analyzing tools as well as its FAQs and videos. It also allows you to export your tax reports to tax offices with ease.
Key Features:
CoinTracking gives you efficient tax reports that work with over 110 exchanges or wallets and more than 9,000 coins. To import your data, it offers automatic imports with API and CSV. You can also import all of your DeFi transactions using its ETH+DEX import. It also offers an analysis into coins that give you a short-term tax rate and gains calculations that support 12 different accounting methods.
Pricing:
CoinTracking has a free version that allows you to track 200 transactions. Its paid plans are as follows:
- Pro: $10.99/month
- Expert: $16.99/month
- Unlimited: $54.99/month
- Corporate: Custom pricing
CryptoTrader.Tax
Best for flexible crypto tax report importing options.
What it Does:
With CryptoTrader.Tax, you can import your trading history and create reports on your profit, loss, and revenue in minutes. You can share these reports easily with integrated software like TurboTax Online, TurboTax Desktop, and TaxAct.
Key Features:
CryptoTrader.Tax supports more than 100 different crypto exchanges. It allows you to import both API and CSV files. It calculates the cost basis and fair market value for your deals as soon as you submit your reports.
Pricing:
CryptoTrader.Tax has a free 14-day no-obligation trial. After that, it offers four pricing plans:
- Hobbyist: $49
- Day Trader: $99
- High Volume: $199
- Unlimited: $299
Crypto Tax Calculator
Best for complex tax calculations and reporting.
What it Does:
Crypto Tax Calculator connects to all the major exchanges and allows you to calculate your taxes owed in just minutes. In just three simple steps, you can generate tax reports for all of your financial years which you can share with your accountant or file.
Key Features:
Crypto Tax Calculator offers configurable tax settings and over 500 integrations. With functionality in the U.S., South Africa, Japan, Canada, and more, Crypto Tax Calculator supports over 80,000 users and covers NFTs, DeFi, and DEX trading. It also supports the most popular LP and staking protocols.
Pricing:
With a free trial available, Crypto Tax Calculator has an annual subscription that covers all your previous tax years. They also offer a 30-day money-back guarantee. Their pricing starts at $49 for up to 100 transactions.
TokenTax
Your #1 full-service option for connecting to all the crypto exchanges.
What it Does:
TokenTax is a tax software provider that also comes with a crypto payment processor and full-service crypto accounting firm all in one. It specializes in token sales and offers a full suite of products that allow you to track, calculate, and report crypto taxes.
Key Features:
TokenTax is the only crypto tax calculator on the market that’s able to communicate with every crypto exchange. They are can import your data from anywhere, allowing you to track all your transactions with ease. It automatically fills out your Form 8949 with your crypto history and offers a full-service solution. TokenTax handles all aspects of digital assets taxes from capital gains calculations to automated tax form creation. It accepts API and CSV imports.
Pricing:
Here are TokenTax’s pricing plans:
- Basic: $65 each tax year
- Premium: $199 each tax year
- Pro: $799 each tax year
ZenLedger
Most straightforward crypto tax management with the best value.
What it Does:
ZenLedger gives you one-click integrations for both wallet providers and exchanges. It allows you to track your transactions and profits while ensuring your taxes are completed accurately. In its effort to be the most comprehensive service on the market, ZenLedger is constantly adding new integrations to their tool, and you can upload your ZenLeder tool transactions to TurboTax in just minutes.
Key Features:
ZenLedger gives you the ability to connect to any exchange or wallet making it easy to work with the options you prefer. It also offers 24/7 customer service by chat, email, and phone. They also use the latest security technology to protect your data.
Pricing:
ZenLedger offers a free tier with 25 free transactions. Their paid plans include:
- Starter: $49 a year
- Premium: $149 a year
- Executive: $399 a year
Koinly
Great for producing free and fast crypto tax reports for low-volume traders.
What it Does:
Koinly is a free software provider that helps you determine your crypto taxes owed and offers straightforward data importing so you can ensure your crypto data is processed with 100% accuracy. It integrates with over 300 exchanges so it’s a great, comprehensive option for most portfolios. It also supports the U.S., Canada, U.K., Australia, and many other countries.
Key Features:
Koinly automatically imports your data through API and CSV imports, so you’re covered whether you’re trading in BTC, ETH, Tezos, or anything else. You can then download capital gains tax forms like the 8949 and Schedule, which you can export to TurboTax.
With Koinly, you get access to a straightforward platform where you can view and manage all your crypto transaction data in one place. In just a glance, you can see how your funds shifted in a given tax year. The platform works whether you’re using tax software like Turbo Tax, doing your own filing manually, or working with an accountant. Koinly uses artificial intelligence (AI) to flag any fraudulent charges in your transaction history, giving you an added layer of security.
Pricing:
Koinly is free and doesn’t require a credit card to begin. Its paid plans begin at $49 per tax year.
Accointing
Best free version with tools for portfolio analysis.
What it Does:
Accointing is a user-friendly software that empowers you to submit your crypto taxes with the advice of CPA (certified public accountant) experts and crypto tax advisers. Accointing gives you mobile and desktop-friendly dashboards where you can track your transactions in real-time.
Key Features:
With just five clicks needed to generate your first crypto report, Accointing allows you to finish your crypto taxes in minutes. You can export all events into a CSV or Excel for ease of data storage and sharing with third-party software. It exports your trades in the appropriate format for taxation in the U.S., U.K., Switzerland, Germany, and Austria. The analysis experience is high-quality with a range of charts based on your real-time transactions.
Pricing:
Accointing offers a free version of its software for up to 25 taxable transactions. After that, it has the following paid plans:
- Hobbyist: $79 for up to 500 taxable transactions
- Trader: $199 for up to 5,000 taxable transactions
- Pro: $299 for up to 50,000 taxable transactions
TaxBit
Great for a real-time view of your crypto transactions with an unlimited free plan.
What it Does:
TaxBit offers both users and tax authorities alike straightforward tax software solutions trusted by many of the industry’s most reliable exchanges. With TaxBit, the process is streamlined unified for everyone involved, whether you’re a user who had to file their taxes or a platform that issued 1099s. It integrates with more than 500 exchanges and wallets.
Key Features:
TaxBit allows for API integration to automatically import your data and give you faster filings. For enterprise companies, TaxBit Consumer offers an additional feature that allows you to see the real-time tax effect of your transactions across your exchanges. This will save you time and reduce the chances of error. Lastly, TaxBit is SOC 2-certified by independent auditors so you can trust that your data is secure.
Pricing:
TaxBit offers a free trial with each of its plans. It also offers a free plan for individual filers using the TaxBit network. Its paid plans include:
- Basic: $50 a year for 250 transactions
- Plus: $175 a year for 2,500 transactions
- Pro: $500 a year for 25,000 transactions
Coinpanda
Best for low-volume and NFT-specific support.
What it Does:
Coinpanda is an excellent user-friendly tax solution for crypto, including DeFi and NFTs. It promises to deliver crypto tax reports in under 20 minutes, which includes your needed tax forms and a capital gains report. It also has an incredibly responsive team that issues regular updates. It’s ideal for low-volume traders as it gets more expensive at a higher volume when compared to competitors like TokenTax, Accounting, CryptoTrader.Tax or ZenLedger.
Key Features:
On top of its NFT-specific benefits, Coinpanda offers analysis on mining, staking, and income, as well as futures and margin trading. It offers support for over 500 exchanges, 75 wallets, and 125 blockchains. It will generate your Form 8949, Schedule D, and Schedule 1 based on your trading activity.
Pricing:
Coinpanda supports unlimited transactions, though it becomes pricier above 20,00 transactions. It has a free plan with 25 transactions which does support NFTs and DeFi. Its paid plans are as follows:
- Hodler: $49 for 100 transactions
- Trader: $99 for 1,000 transactions
- Pro: $189 for 3,000 transactions
- Satoshi: $389 for 20,000 transactions with the option of buying more in bundles of 100 transactions for $0.69
Crypto.io
Best at offering investment integrations.
What it Does:
Crypto.io offers support for decentralized finance or DeFi, numerous exchange, and institutional custody solutions. It allows you to track your crypto assets and automate accounting with its many integrations.
Key Features:
Crypto.io integrates with accounting systems such as Quickbooks, Xero, and more. It offers cost basis data and market rates to help you track your losses and gains. You can link an unlimited number of transactions, wallets, custodians, and exchanges.
Pricing:
Crypto.io offers plans with monthly and annual billing. Each of the following plans offers a free trial of 14 days.
- Starter: $39/month
- Pro: $89/month
- Premium: $249/month
- Enterprise: Custom quote
Our Top 3 NFT Tax Software Options
If you’re an NFT holder, you’ll want to find software that makes sense with your portfolio. As NFTs and DeFi are newer technologies, there’s a smaller pool of options that offer a set of tools specific to those needs. With this in mind, these are our top three NFT tax software options:
- TaxBit
- Crypto Tax Calculator
- ZenLedger
Honorable Mention: Koinly, TokenTax
TaxBit offers an Enterprise Tax Center package that helps you manage your books particularly if your business deals with crypto, DeFi, or NFTs. it’s the only company to support DeFi for free.
Crypto Tax Calculator has integrations with a variety of NFT marketplaces to cover your needs. It also offers categorization options for your NFT-related activity, such as minting, selling, buying, and trading.
ZenLedger integrates with over 500 exchanges and wallets and offers NFT and DeFi support features on its $149 premium tier. Its DeFi support is a bit limited for the most active traders but it has great integrations with TurboTax and its plans have the most bang for your buck.
Koinly has a great pricing structure and a basic plan that reports both trading and DeFi activities for U.S. filers. It has somewhat more limited network integration than TaxBit and ZenLedger, with syncing to 350 exchanges and 50 wallets. It also doesn’t have NFT-specific native support but makes the list because of its DeFi support features and its plans for future NFT support.
TokenTax is a great full-service crypto software that makes our honorable mentions because it specializes in DeFi. Its downside is that it’s a much more expensive option but it may be worth it for NFT investors with lots of DeFi transactions.
Other crypto tax software not mentioned in this post include Bitcoin Taxes, BearTax, Tax.Crypto, and Blockpit’s CryptoTax.
Crypto Tax FAQs
Still looking for more information to demystify the world of crypto, NFTs, and taxation? Here are answers to the most commonly asked questions, specifically geared toward U.S. holders.
Is there any way around paying taxes on cryptocurrency? Will the IRS really catch me if I don’t?
It’s worth taking crypto taxes very seriously as there’s no way around it (short of fleeing to El Salvador or Puerto Rico), and the IRS is prepared to catch violators. Many people think that crypto transactions are anonymous and thus, the IRS won’t notice missed reporting. However, that’s not the case. Because blockchain is a public ledger, the IRS can analyze the blockchain and identify people who don’t report.
In fact, the IRS has hired an IT firm called Chainalysis to do just that. The IRS has also formed a task force of criminal investigators that enforces crypto tax compliance. Furthermore, crypto exchanges like Coinbase provide the IRS with data on thousands of its users in the form of a Form 1099-K that it sends to the IRS and users with over 200 or $20,000 in transactions each year.
Underreporting or failing to report your crypto transactions can lead to severe consequences like criminal prosecution, fines of up to $250,000, and five years in prison.
How can I minimize my crypto tax burden?
There are a few ways you can reduce your tax burden.
First, you might use a Roth IRA to buy paper crypto in bitcoin and crypto ETFs and trusts. This helps you by using the funds you’ve already paid taxes on to invest in crypto like BTC. Thus, you can avoid capital gains at sell.
Another workaround if you’re assets aren’t in great shape is to sell your crypto, realize the losses, and then buy the crypto back again. As a result, you’ll be in a lower cost basis so you could defer taxes down the road when and if you make profits.
Lastly, as alluded to before, you could renounce your citizenship and move somewhere that doesn’t collect a tax on capital gains. This is, of course, an extreme option but it still makes the list so you can consider all of your options.
Do I have to pay taxes on cryptocurrency even if I had losses?
Say you had a rough year in crypto and you only made losses on your assets; you do still have to report this on your taxes. You must report both profits and losses. The benefit of reporting losses specifically is that it may allow you to reduce your crypto taxes in the future so it’s in your best interest to do so.
How are my crypto interest accounts taxed?
All interest in crypto savings accounts is treated just like a typical (fiat) interest account: like income. So if you have coins in interest accounts with Ledn or Blockfi or elsewhere, you don’t need to pay capital gains on this interest.
Do I have to pay taxes if I just transferred crypto wallet-to-wallet?
If you don’t own the second wallet, you must pay capital gains on whatever you transferred as it is viewed as the same thing as a sale. However, if you’re the owner of both wallets, no sale is occurring so you don’t have to report or pay taxes on this transfer.
Do I have to pay taxes on crypto-to-crypto trades?
Yes. All crypto-to-crypto (or crypto-to-fiat) trades count as taxable events. In the eyes of the IRS, trading one crypto for another is basically the same thing as selling the first crypto and buying the second. Since each trade results in either a profit or a loss on the first crypto as well as a new cost basis on the second, this means that each trade is subject to capital gains taxes. In this case, crypto trades are treated much like stock trades.
Do I have to pay taxes if my government hasn’t legalized crypto?
Yes. Almost every time you buy, trade, or sell crypto qualifies as a tax-eligible occurrence, even if your government hasn’t legalized cryptocurrency.
Can I pay my taxes in crypto?
Most jurisdictions don’t accept tax payments in crypto, though this may change in the future. Some places, like the U.S. state of Ohio and the Swiss canton of Zug, accept taxes in Bitcoin. The state of Colorado is also considering taking this step.
Don’t exchanges (such as Coinbase) generate my tax documents for me?
You can’t count on this being the case. Some exchanges, like Coinbase, give you reports of your annual trading activity, however, these aren’t always the same documents required by the IRS. It’s ultimately up to you to pay and document your taxes appropriately.
How is crypto on PayPal taxed?
If you’ve made use of PayPal’s recent October policy that allows you to buy, sell, and hold digital crypto on the platform, you will need to pay taxes on your assets just as when you’re holding the coins yourself.
PayPal’s terms of service also make it clear that determining your tax liability is your responsibility not theirs:
“It is your responsibility to determine what taxes, if any, apply to transactions you make using your Cryptocurrencies Hub. You can access your transaction history and account statements through your PayPal account for purposes of determining any required tax filings or payments.”
What alternatives to crypto tax software do I have?
If you don’t want to make use of tax software, you have the following options:
- File your taxes yourself
- Hire a CPA to ease your tax filing process
- Hire a crypto tax lawyer that can advise you on your crypto holdings
- Buy standard tax software that offers crypto features, like versions of TurboTax
For more information on all of the above, you can also consult the IRS’s series of FAQs issued in 2014 and 2019 regarding crypto activities. The 2014 series represented the first time the IRS addressed crypto, and the 2019 guidance doesn’t change the initial rules but just provides additional clarification about unique situations. Additionally, the IRS released a Revenue Ruling 2019-24 document which specifically addressed hard forks and airdrops.
Final Thoughts
Tax season is, unfortunately, a necessary evil but thankfully, software solutions on the market today alleviate the burden. When approaching any sort of manual data entry (or tax season in general), the best practices in terms of crypto taxation are as follows:
- Become familiar with the latest IRS rules about crypto taxation (which you’ve already begun by studying this guide and its links!)
- Don’t try to cheat the IRS—the risks are just too high.
- Choose the right crypto tax software program with all the features you need.
- Don’t ignore any notices from the IRS.
- Seeking out professional help is a great idea to ensure you don’t have any confusion or errors.
All in all, this extensive guide should help you navigate the 2022 tax season and beyond. Just remember, as you square away your tax details, make sure to check out all the options available to you and do your own research. Additionally, consider consulting with an accountant to make the best decisions for your portfolio.
About Metaverse Land Club
The Metaverse Land Club is a think-tank tool-kit community for investor-entrepreneurs looking to grow generational wealth with the metaverse. MLC provides investor-entrepreneurs with access to insider deals, private auctions, and organized group buys for virtual real estate in the Metaverse. Stay tuned for Metaverse Land Club’s plans to promote proprietary investment analysis SaaS tools to uncover hidden deals for members.
Metaverse Land Club and its affiliates do not provide tax, legal or accounting advice of any kind. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors.
Authored by Amanda Lawson.