After some time, seeing that you’re profiting massively, you decide to sell some of your tokens. Sometime later, you decide to buy a new token that you believe will revolutionize the world.
The problem is, of course, keeping track of all these purchases and sales. You want to keep track of whether you’re actually turning a profit or not, plus you need to calculate what you owe your country’s taxman at the end of the year.
Crypto taxes are a complex topic, but I’ve done my best to summarise the situation in several major countries, so check out my post on how Bitcoin and other cryptos are taxed around the world.
So what are your options for crypto tax preparation?
You could keep track of things manually using a tool like Excel, but this quickly gets out of hand, especially if you’re trading on multiple platforms or have multiple wallets.
The better solution is to use an online crypto tax preparation tool. Here are the best crypto tax software solutions.
CoinTracker is a useful platform that is suitable for cryptocurrency investors of all shapes and sizes. For example, you might be a passive investor that buys and sells a few coins each year. If this is the case, you should be fine sticking with the CoinTracker Free Plan, which permits up to 25 transactions.
See also: My detailed review of Cointracker.
I like the fact that you will still have access to the vast bulk of features on the Free Plan – especially capital gains reporting and your choice of accounting standards. At the other end of the spectrum, CoinTracker is especially useful if you actively trade cryptocurrencies,
Although you will need to pay a fee for anything above 25 transactions, the application has the potential to save you countless hours of manual reconciliation. In fact, you will stand the best chance possible of avoiding a mistake that in the long-run, could end up costing you significantly more in tax authority fines.
This is one of the most complete services available out there. They have two offerings, one for crypto traders and the other for crypto companies.
TokenTax is a crypto tax software platform and a full-service cryptocurrency tax accounting firm. This tool also takes care of tax loss harvesting. If you hold assets at a loss, then you can save money on your taxes. TokenTax’s Tax Loss Harvesting dashboard tells you exactly how much losses you can claim by strategically selling off assets.
Tax loss harvesting is selling off assets you hold at a loss to reduce your capital gains. When you reduce your capital gains, you owe less taxes. And, if you take a loss in crypto, you can offset other capital gains in assets like stocks.
Support for margin trading is also included.
CryptoTrader.Tax takes away the pain of preparing your bitcoin and crypto taxes. Simply connect your exchanges, import trades, and download your tax report in minutes.
What’s your favorite crypto tax preparation tool?