The tax has been a proponent of people’s lives for many years. Ever since someone started earning money, they have given a portion of their earnings for tax reasons. In the crypto world, even if it is a decentralized platform, it cannot hide from the site of the officials. Therefore, if anyone benefits from the sale of a cryptocurrency, they are liable to pay a certain amount of tax on it. What the tax ratio should be hasn’t been globally decided. Each country has its own set of rules under which they charge cryptocurrency users with tax. Being charged tax on crypto earnings can be compared to income tax. A person earns a certain amount of money in their sale of crypto, and a portion of that making is subjected to tax by the government. Some countries have a kind approach to their citizens on how much tax to charge their crypto-using citizens. Others, however, don’t share the same sentiment, and their tax percentages can be very high than what is preferred by their population.
Crypto Tax Rates in different countries
Countries like Singapore, Malaysia, Germany, and El-Salvador, etc., have a lenient view on how much tax to charge their citizens selling crypto. Most don’t consider crypto a capital asset but categorize it as private money. Therefore, they haven’t established a high tax ratio on their crypto-selling population. It doesn’t mean anyone can make thousands of dollars worth of crypto transactions and get away with it. A specific set limit varies from country to country; if you exceed it, you are liable to pay tax. For example, in Germany, no tax will be charged for the sale of crypto below €600. If you exceed this limit, then you will have to pay tax.
Some countries have much more harsh standards set on taxes that the government must collect from their crypto users. Japan, France, and The Netherlands are labeled by many as a crypto tax minefield. In France, traders are liable to pay a Single Fixed Levy of 30% on their earnings. Professional trades and crypto miners must pay a business income tax of 45%. In the Netherlands, they can charge you on even fictitious gains. Like even if you are not selling any crypto but you HODL crypto, you will have to pay tax on it.
Similarly, crypto mining, staking, and Defi activities are subjected to tax by the government. In the USA, the government views cryptocurrency as property rather than a currency. So like taxes on property, they also charge you taxes on crypto. A cryptocurrency user in the USA will have to pay up to 37% tax on short-term capital gains and 0%-20% tax on long-term capital gains.
Why should Crypto traders use crypto tax software?
Filing taxes can be an arduous task in itself. It isn’t everybody’s cup of tea, and most people hire firms and accountants to do their grunt work for them. To limit their dependency on approaching others to file their taxes, many companies have introduced crypto tax software where crypto users can file their taxes without hassle. This way, not only are they keeping their crypto earnings private from other people’s eyes, but they also get a first-look view of how much tax they are paying on their crypto earnings.
How does Crypto Tax Software work?
Before we Jump into what crypto tax calculating software to use, let’s just briefly go over the method they use to calculate the value of tax that a user is charged for their crypto-selling activities. Several methods or formulas are stated on different platforms used by their tax calculating software to determine the value of tax to be assessed. These formulas come to be termed Cost Basis Formulas for tax software users.
FIFO (First in, First out)
FIFO is a valuation method in which the first crypto asset a trader buys is also the first crypto asset they sell. For tax purposes, this valuation method assumes that the oldest cryptocurrency a crypto trader buys is the first cryptocurrency they sell. The value of the profit made is the amount on which the software will calculate the tax.
Test Scenario
Suppose you bought $2500 worth of ETH as your first purchase. When you plan to sell it, the value of ETH has increased to $3500. The profit you make is $1000. That profit made is called capital gain. The value of the capital gain is the amount on which the software will calculate tax.
LIFO (Last in, First out)
LIFO is opposite to FIFO. A trader using the LIFO method must implement the cost basis formula on their most recent crypto sales. Meaning a trader is selling first the last crypto they have purchased for their crypto portfolio.
Test Scenario
We will use the same test scenario mentioned in FIFO. Here a trader buys Eth worth $2750, which was his most recent purchase and sells it at $3500. Using the LIFO method, the capital gain made by a user is $750, which is their taxable amount. This method resulted in a trader gaining $250 more capital gains than FIFO.
(HIFO) Highest Cost, First Out
In HIFO, a trader first sells the cryptocurrency with the highest cost basis/the most expensive asset. Like the test scenario in LIFO, HIFO would yield a trader the same profit. But, in systems where a trader makes hundreds of selling transactions, HIFO would produce a trader more in reducing taxable amounts. The HIFO method can also be termed a tax-minimization method.
(LCFO) Lowest Cost, First Out
In LCFO, a trader sells the minor expensive crypto asset first. The difference in the sale price and buying price of that crypto asset determines the taxable gains or losses.
(ACB) Average Cost Basis
In ACB, we calculate the average cost for all assets by adding the total amount paid by a trader to buy crypto assets and then dividing it by the number of coins/tokens.
(Spec ID) Specific Lot Identification
Pick out the crypto asset you want to sell using TXN (transaction number assigned to a particular crypto trade) numbers.
(LGUT) Loss Gain Utilization
In this method, a trader uses the cost basis that would first result in the most significant loss.
Best Crypto Tax Software
Koinly
- Supports 350+ exchanges and 50+ wallets
- Supports 6000+ blockchains
- Binance, Crypto.com, Kraken, Coinbase, BitMEX, HitBTC, Bitpanda, and Bybit are examples of exchanges that can be integrated with Koinly.
- Koinly provides features that include a view of your total holdings, actual ROI and invested fiat amount, income overview, profit/loss, and capital gains.
- Users can synchronize different exchanges on one Koinly interface and view the margin trading and futures trading portfolios.
- It supports 17000+ cryptocurrencies.
- You can create a free account on Koinly. It would, however, won’t give you tax reports, audit reports, or cost analyses.
- Subscription charges range from $49 for Newbies to $179 for Professional Traders.
Cointracking
- CoinTracking Supports 110+ exchanges.
- Users can have access to 25 customizable reports.
- Tax reports for 100+ countries are available.
- CoinTracking has security features like Data encryption and 2-factor authentication.
- Chart history available for 20,000+ coins
- Detailed tutorials and video guides are available.
- Binance, Bybit, Huobi, CEX.IO, Bitpanda, Bittrex, and Bitfinex are some of the exchanges that can be integrated with this tool.
- It has a free demo for users.
- Subscription plans cost $10.99/month for Pro users to $54.99/month for the Unlimited plan.
Accointing
- Accointing has support for 400+ exchanges and 10,000+ currencies.
- Binance, BitMEX, Bitstamp, Bitpanda, Coinbase, Bittrex, FTX, Kraken, and KuCoin are examples of exchanges supported by Accointing.
- Users can automatically classify and calculate their taxes.
- Identifying possible tax-saving opportunities is also a provided feature.
- It has a free starter pack for filing up to 25 transactions.
- The minimum Hobbyist subscription plan costs $79/year.
- The Pro subscription plan costs $299/year.
ZenLedger
- ZenLedger has a Crypto tax-loss harvesting tool where they can analyze their trade histories and view lists of tax-saving opportunities.
- It provides a one-page interface to view all your transaction histories across different wallets and exchanges on the same page.
- It has a FAQ page and customer service center where they will reply within a few minutes regarding any queries user posts.
- It has a free starter pack for filing up to 25 transactions.
- The Starter pack costs $49/year.
- The Advanced Platinum pack costs $999/year.
- It is compatible with 300+ crypto exchanges and 3000+ coins.
- Binance, BitMEX, Bitstamp, Bitpanda, Crypto.com, Coinbase, Bittrex, FTX, Kraken, eToro, and KuCoin are some examples of exchanges supported by ZenLedger.
CoinTracker
- CoinTracker has easy-to-use forms and documents with detailed reporting for its users.
- Users can download forms manually or connect to e-filing software like TurboTax, TaxAct, etc.
- Users can also view the tax impact on their upcoming transactions on CoinTracker.
- CoinTracker provides information on tax-loss harvesting opportunities.
- It has a free starter pack for filing up to 25 transactions.
- It is compatible with 300+ crypto exchanges and 10,000+ coins.
- Charges for the Hobbyist pack are $59.
- Charges for the Premium pack are $199.
- The Unlimited plan costs up to $3000, depending on the number of transactions.
Blockpit
- Blockpit provides tax reports as a PDF document.
- Legally compliant tax reports according to tax laws of different countries.
- Blockpit offers Pre-Prepared tax reports as a time-efficient feature.
- Compatible with 50+ exchanges and has compatibility with 19,000+ currencies.
- Binance, BitMEX, Bitstamp, Bitpanda, Crypto.com, Coinbase, FTX, Kraken, and KuCoin are examples of exchanges supported by Blockpit.
- It has a free starter pack for filing up to 25 transactions.
- The Basic plan costs €79/per fiscal year.
- The Professional plan costs €599/per fiscal year.
TAXbit
- TAXbit has NFT Suite to calculate taxes.
- Free generation of primary crypto tax forms with unlimited transactions.
- Tax-Loss Harvesting functionality.
- Compatible with 500+ exchanges and has compatibility with 4000+ currencies.
- It is compatible with 500+ crypto exchanges and 4000+ coins.
- The Basic plan costs $50/Year.
- The Pro plan costs $500/Year.
Ledgible
- Ledgible provides an advanced client portal to connect with its users efficiently.
- It also offers enterprise-grade security for its users.
- Progress indicators to track progress
- Advance reporting integrations to generate necessary tax forms.
- It has a 30-day free trial for new users.
- The Basic plan costs $49.
- The Advanced plan costs up to $250, depending on the number of transactions made.
- The Enterprise-Level package has custom pricing depending on the type of services selected.
| Crypto Tax Software Comparison | Reporting Methods | Min Subscription Fee | Max Subscription Fee | Free trial | Mobile Application |
| FIFO, LIFO, HIFO, ACB | $49/tax year | $179/tax year | Yes | – | |
| ACAB, AVCO, FIFO, LIFO, HIFO, LOFO, HPFO, LPFO, HAFO | $10.99/month | $54.99/month | Yes | Android & IOS | |
| FIFO, LIFO, HIFO | $79/year | $299/year | Yes | Android & IOS | |
| FIFO, LIFO, HIFO | $49/year | $999/year | Yes | – | |
| FIFO, LIFO, HIFO, ACB | $59/tax year | Up to $3000/tax year | Yes | Android & IOS | |
| FIFO, LIFO, HIFO | €79/tax year | €599/tax year | Yes | Android & IOS | |
| FIFO, LIFO, HIFO, LOFO, ACB | $50/year | $500/year | Yes | – | |
| FIFO, LIFO, HIFO | $49/tax year | $250/tax year | No | – |