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If you traded cryptocurrencies or NFTs last year, you will need some type of crypto or NFT tax software to help you prepare your taxes.
Cryptocurrency trading was unheard of just a few years ago, but today it is commonplace. This results in more investors having to report capital gains and other income from cryptocurrencies on their tax returns.
Unfortunately, most traditional tax software companies are unable to handle the complex taxation of crypto tokens and NFTs. If you are a crypto trader, you will also need to purchase crypto tax software in addition to a traditional tax filing platform. And if you've ever done anything with NFTs, you probably have to do some manual work.
In this guide, we explain why you need both traditional and cryptocurrency tax software and how to choose the best one for you.
Do you need separate software to file crypto taxes?
You will likely need separate cryptocurrency tax software in addition to a traditional tax application to report your crypto income. Currently, TurboTax Premier is the only major tax software that calculates your crypto tax liability. However, only transactions that took place on a few major exchanges are supported. If you do not trade on these exchanges (or own custody or use DeFi), you will need to manually calculate the fair market value of your transactions.
Software designed specifically for cryptocurrency trading and investing fills these gaps. Crypto-specific accounting software has been around since 2017, but its importance has increased in recent years as more and more people dabble in the digital world of cryptocurrencies. Today, more than half a dozen reputable companies can accurately calculate taxes due based on your trading history.
How crypto is treated by the IRS
The IRS treats cryptocurrencies similarly to other investments. Investors can make or lose money by trading, earning interest, staking rewards, or mining cryptocurrencies. Each type of income (or loss) has different tax implications.
Unlike earnings paid in a fiat currency, the fair market value of crypto gains, losses, and earnings is not always easy to calculate. Taxpayers can determine the correct value by determining the U.S. dollar exchange rate at the time of purchase or acquisition and the value at the time of sale.
Doing this manually for one to two transactions is not a big deal. However, more transactions mean more work and a higher likelihood that you will need crypto tax software to assist.
What reports do I need to file my crypto taxes?
Most crypto traders simply need to transfer records from IRS Form 8949 to Schedule D. This is the same schedule for reporting stock sales.
TurboTax has a robust support mechanism for transferring crypto transactions from Form 8949 to your tax return. TaxAct also supports adding the form as an attachment.
However, the crypto tax software platforms discussed below can generate Form 8949 as well as additional reports required to complete other filing reports from non-trading transactions. Below I have listed some tax return sections and forms that may apply to crypto investors:
- Annex 1: Investors who have received gifts (including airdrops) or income from forks or mining income must report these as other income on line 8 of Schedule 1. All software packages included in this review allow users to manually enter these transactions into the software. The information from this must be manually transferred to Schedule 1.
- Plan b: Investors who have earned interest or income through lending or staking must report their investment returns on Schedule B. Outside of the crypto world, you'd expect to see this information on a 1099-INT or 1099-DIV statement. However, Coinbase issues this information using Form 1099-MISC.
- Schedule C: Investors who mine cryptocurrencies may be entitled to deductions on their taxes. You should report all mining activities in accordance with Schedule C. If you receive a 1099-MISC related to this activity, you can use it to report your income. However, most miners need to use a tool to convert their mining activities into US dollars.
Unfortunately, each software platform has different requirements for entering and reporting this information. Despite the differences, each recommended software supports these lesser-used options in some way.
Related:
Accounting and bookkeeping for crypto and NFTs
Best crypto and NFT tax software
The best crypto and NFT tax software calculates your tax liabilities based on your blockchain activity. Most importantly, these tools calculate capital gains and losses based on your trading activity as well as mining, lending, and staking income.
All companies examined here prepare IRS Form 8949, which calculates capital losses. The information from this form will appear on Schedule D of your tax return.
These software companies also produce reports that allow you to report income from interest (or loan remuneration) or mining-like activities. You report investment income on Schedule B and mining income (and related expenses) on Schedule C.
We've divided our list into two overarching categories:
- Best DeFi tax support software
- Best CeFi software for tax support
Read on to see all of our picks for the best crypto and NFT software for 2024.
Best DeFi tax support software
Decentralized Finance (DeFi) is a trustless, permissionless financial ecosystem. The focus is on “smart contracts” and trust in technology rather than companies. A larger number of NFTs are being produced and exchanged via DeFi. Smart contracts allow individuals to prove ownership of a unique token (NFT).
In the eyes of the IRS, an NFT is the same as any other token. The fair market value for each NFT is determined based on the conversion of ETH to USD (or the underlying blockchain that supports the NFT). There are other uses for DeFi, but creating and trading NFTs are among the most popular
Note: If you're looking for last year's favorite, TaxBit, was discontinued in 2023 and is no longer available.
Best Overall: CoinTracker
CoinTracker offers the best overall experience for tracking your taxes via your web browser or mobile device, making it extremely easy to generate accurate tax reports. The only major downside is the pricing. It's not the cheapest crypto tax software, but the interface and ease of use make it our favorite for year-round use.
Tax preparation assistance costs $59 to $599 per tax year, although you may receive discounts depending on when you file.
Best full service: TokenTax
TokenTax is a full-service crypto tax software company. The company specializes in DeFi and other “exceptional” crypto problems. For example, it helps with forensic accounting based on defunct exchanges. Although very costly, it is a top option for NFT investors and those with thousands of DeFi transactions in large portfolios.
Best Value: ZenLedger
ZenLedger offers DeFi support on its premium tier for $149. ZenLedger has preferred integrations with TurboTax, making it a cost-effective and high-quality option for DeFi crypto traders.
Low Cost for Low Volume Merchants: Koinly
Koinly is slightly more expensive than ZenLedger, but supports DeFi at all levels, including the $49 newbie tier. The company also supports taxes for algorithmic traders with more than 500,000 transactions per year.
Best CeFi tax support software
Most crypto traders use Centralized Finance (CeFi) for their investment activities. Traders in this camp conduct most of their trades through exchanges where a company facilitates trading activities.
Users can transfer tokens from the exchange to a hardware crypto wallet. However, your primary trading activity takes place in a central location.
At the time of taxation, CeFi traders typically enjoy simpler tax treatment. They can usually download their activity directly from an exchange and prove the fair market value of all their trades. These are some of the best options for CeFi traders.
Best for Coinbase Users: TurboTax Premier
If you only traded through Coinbase, you don't need any additional tools. Just pay for TurboTax Premier. TurboTax can connect directly to the exchange and read all of your transactions. It calculates the taxes due on all of these deals – you don't have to pay for any additional software.
Free for low volume: ZenLedger
ZenLedger generates Form 8949 for free for users with up to 25 transactions per year. The price of the product is competitive at every level, so crypto traders should consider it (especially those with 1,500-5,000 transactions). The product supports all crypto earnings including staking, rewards and other sources.
Best for Everyday Traders: CoinLedger
CoinLedger, formerly CryptoTrader.tax, offers a “Day Trader” tier for filers with 100-1500 transactions. This $99 option is a great price for many active traders who don't want to pay extra to support thousands of transactions. DeFi support and other features coming soon.
Why you should trust us
The team at The College Investor has tested many of these tax applications for our own tax filing needs, not just audits. This gives us a unique insight into how they work and what you can get. We focus on cost, ease of use, and other features that will help you manage your crypto taxes. Our goal is to provide you with unbiased, helpful reviews so you can complete your cryptocurrency taxes with the most affordable software for your needs.
Final thoughts on the best crypto and NFT tax software
In 2024, most crypto investors will need the combination of custom crypto tax software AND typical tax filing software. TurboTax Premier is our top tax software for crypto traders this year, but most traders need to pair it with custom tax software.
For crypto-specific software, most users should consider ZenLedger, CoinLedger or TaxBit. However, there may be edge cases where an alternative to these offers better functionality or lower cost.
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