Since the second half of the last decade, the popularity of cryptocurrencies has rapidly been increasing. This has also resulted in a large amount of confusion among crypto traders as when it comes down to the right way of how to go about filing crypto to crypto taxes.
What are the Main Advantages of Cryptocurrency?
-A cryptocurrency is an internet-based medium of exchange developed and established in 2009. Its most significant characteristic is that it is independent of a governing body or central authority, unlike conventional FIAT currencies such as the U.S Dollar. Cryptocurrencies operate on Blockchain technology.
Cryptocurrency Transactions Cannot Be Reversed
There is no way to them, irrespective of your actions. Your local bank or central authority can do very little to remedy your situation because they have no control over cryptocurrencies.
Cryptocurrency Transactions are Pseudonymous in Nature
The cryptocurrency transactions that you carry out are on digital addresses that contain chains made up of multiple characters. There is no way for you to trace the real-world identities of the crypto accounts with whom you perform transactions.
Cryptocurrency Transactions Cannot Be Tampered With
Crypto transactions are recorded on a distributed ledger, and hence, there exists no single point of vulnerability or failure. Every component in the network possesses a copy of the ledger, which means that every transaction can be verified.
As a result, transactions are less prone to hacking, bugs, and system failure. This is not the case with a centralized system. Cryptocurrencies are known to be limited in their supply, which makes them invulnerable to economic anomalies like inflation.
How Can I Calculate My Cryptocurrency Earnings?
Cryptocurrencies are considered assets for tax purposes. In other words, cryptocurrency transactions are subject to capital gains, as-is property. Capital gains ought to be reported on the 8949 form. Your capital gains tax is either short-term or long-term, entirely depending on how long you have held on to your Bitcoin.
Unfortunately, concise explanations on crypto to crypto tax do not suffice in most cases. The introduction of cryptocurrency tax calculators has managed to ease the process of filing crypto taxes and, in turn, is bound to simplify your journey into the world of crypto to crypto tax.
What are Some of the Leading Cryptocurrency Tax Calculators Available?
Here are a few crypto tax software that are known to help crypto traders navigate everything from crypto to crypto tax.
ZenLedger is a well renowned free crypto tax calculator. It doubles as a great crypto tax software as well and provides a ton of additional features, some of which are listed below.
- It is compatible with all major crypto exchanges, supporting cryptocurrencies and fiat currencies.
- It imports your crypto trading history and seamlessly generates the important documents such as donations report, capital gains report, closing report and income report.
- It also provides you with accurate profit and loss statements for you or your Certified Public Accountant (CPA) to use.
CryptoTrader.tax allows crypto traders to calculate capital gains or losses within minutes of importing a trader’s crypto data and ensures that you do not overpay your taxes. CryptoTrader.Tax is well known for their international tax support and is quite capable of calculating your capital gains and losses using traditional fiat currency.
- Cryptocurrency Income Report
- Long-term and Short-term Sales Report
- The IRS Form 8949
- The TaxAct Direct Import Report
- End of the Year Positions Report
- A Crypto trader’s Audit Trail Report
TokenTax is designed to support every major crypto exchange and is found on every top 10 free crypto tax calculator list. Apart from calculating your crypto taxes, TokenTax has many additional features to assist with all your crypto needs.
- It can automatically generate tax forms like Form 8949 for returns.
- It imports your crypto data and information from exchanges to fill in Form 8949.
- It enables you to track capital gains and losses and other tax liabilities for each crypto trade.
- It has a tax-loss harvesting feature enabled on its dashboard that displays your unrealized gains and losses.
CoinTracker is another free crypto tax calculator and software. Claiming to be the one stop solution for all your crypto needs, some of their features are as follows.
- It provides crypto traders to review their tax summary and download completed reports which are required to file crypto taxes.
- It can be integrated with TurboTax, hassle-free.
- It provides options such as fee and margin trading.
- It provides traders with a performance tracker which can visually provide information on a trader’s crypto investment and portfolio management.
BearTax is not only a free crypto tax calculator but also offers useful tools such as calculating your capital gains and losses and providing you with export documents to file with your tax report.
- A dedicated section for capital gains and losses on individual crypto trades.
- Displays information such as the date you bought, sold or traded each crypto coin.
- ‘Smart matching’ algorithm (matches crypto deposits and withdrawals from supported exchanges).
- Ability to review individual trades and helps avoid negative balances.
These are a few of many stellar crypto tax software on the market that are designed to help you navigate the world of crypto to crypto tax. Regardless of your experience as a crypto trader, crypto tax software has proven itself to be indispensable tools.