Over the past few years, cryptocurrency trading has moved from an unheard of concept to a common investment and trading practice. This increase means more people will be required to report capital gains and losses on transactions (in 2023) on their 2022 tax returns.
Unfortunately, most traditional tax software companies are ill-equipped to handle the complex taxation of crypto tokens and NFTs.
If you are a cryptocurrency trader, you will probably need to purchase cryptocurrency tax software and traditional tax filing tools. Additionally, if you have used NFTs, you may have to do some manual work with your tax software. We’ll explain why you need both and how to choose the best method.
Do I need another software to file my crypto tax?
Probably yes.
At the moment, TurboTax Premier is the only leading tax software that calculates your cryptocurrency tax liability. However, it can only be done for transactions originating on a few major exchanges. If you do not trade on these exchanges (or use self-custody or DeFi), you will need to manually calculate the fair market value of your trades.
Software designed specifically for crypto trading fills these gaps. Dedicated cryptocurrency accounting software has been available since 2017, but its importance has exploded in recent years. Today, 6+ reputable companies can accurately calculate taxes based on your transaction history.
In most cases, crypto traders are advised to use tax software to calculate their tax burden. Even casual traders have free access to this type of software.
How virtual currencies are treated by the IRS
of IRS treats cryptocurrencies as propertyInvestors can make or lose money by trading, earning interest, or staking rewards. Each type of income has different tax effects.
Unlike income paid in fiat currency, the fair market value of cryptocurrency gains, losses, and income is not always easy to calculate. Tax filers can calculate the value of a token by looking at the USD to token exchange rate at the time of purchase or acquisition and the value at the time of sale.
It’s not a big deal to do this manually in one or two transactions. However, the more you trade, the more likely you are to need software to help.
What kind of report do I need to file my crypto tax?
Most crypto traders only need to transfer records from IRS Form 8949 This is the same schedule for reporting inventory sales.
TurboTax has strong support mechanisms for transferring cryptocurrency transactions from Form 8949 to tax returns. Similarly, TaxAct supports adding forms as attachments.
However, the companies reviewed below also produce the reports required to complete other filing reports from non-trading transactions. These are some other tax return sections that may apply to crypto investors.
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Schedule 1: Investors who receive income from gifts (including airdrops) or fork or hobby income must report it 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.Information from this should be forwarded to Schedule 1 manually.
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Schedule B: Investors who earn interest or rewards from loans or staking are required to report investment income. Schedule BOutside of the crypto world, we would expect to see this information in a 1099-INT or 1099-DIV statement. However, Coinbase has published information about 1099-MISC.
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Schedule C: Investors who mine cryptocurrencies may be eligible for tax deductions.They must report all mining activity Schedule CIf you receive a 1099-MISC related to this activity, you can use it to report your income. However, most miners need to use tools that convert their mining activity into US dollars.
Unfortunately, different software has different requirements for entering and reporting this information. Although there are differences, each of the recommended software supports these lesser-used options in some way.
Related: Bookkeeping and accounting for cryptocurrencies and NFTs
Best Crypto and NFT Tax Software
The best crypto and NFT tax software calculates taxes due based on blockchain activity. Most importantly, these tools calculate capital gains and losses based on your trading activity.
All of the companies reviewed here have completed IRS Form 8949 to calculate capital losses. Information from this form will appear on Schedule D of your tax return.
These software companies also produce reports that can be used to report interest (or loan fees) or income from mining-type activities. You report investment income on Schedule B and mining income (and related costs) on Schedule C.
I’ve grouped the list into two overarching categories.
- Best DeFi Tax Support Software
- Best CeFi tax support software
Keep reading to see all our picks for the best crypto and NFT software for 2023.
Best DeFi Tax Support Software
Decentralized Finance (DeFi) A trustless, permissionless financial ecosystem. It emphasizes “smart contracts” and trust in technology over business entities. More NFTs are being created and exchanged using DeFi. Smart contracts allow individuals to prove ownership of unique tokens (NFTs).
In the eyes of the IRS, NFTs are like any other token. The fair market value of NFTs will be determined based on the conversion of ETH to USD (or whatever the underlying blockchain supports NFTs). DeFi has other uses, but creating and trading NFTs are some of the most popular uses
Best Overall: TaxBit
tax bit is the only company to support DeFi tax for free. As long as the user can connect to a supported exchange, the TaxBit engine will report the current value of his NFT collection and generate free tax reports based on his trading history.
TaxBit discontinued its paid consumer products last year, so you only have access to self-service features.
Best Full Service: TokenTax
TokenTax is a full service crypto tax software company. The company specializes in DeFi and other “abnormal” cryptographic issues. For example, it is useful for forensic accounting based on defunct exchanges. Although expensive, it is the best option for an NFT investor or his DeFi trading investor.
Best Value: ZenLedger
ZenLedger offers DeFi support on the $149 premium tier. ZenLedger prioritizes its integration with TurboTax, making it a cost-effective and high-quality option for DeFi crypto traders.
Low cost for low volume traders: Koinly
Koinly is a bit more expensive than ZenLedger, but supports DeFi at all tiers, including the $49 entry level. The company also supports taxes for algorithmic traders who make over 500,000 trades per year.
Best CeFi tax support software
Most crypto traders use centralized finance (CeFi) for their investment activities. Traders in this camp do most of their trading through exchanges where the company facilitates trading activity.
Users can transfer tokens from exchanges to hardware crypto wallets. However, their main trading activity takes place in a centralized location.
When it comes time to pay taxes, CeFi traders typically enjoy easier tax treatment. They can usually download their activity directly from the exchange to 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 trade using Coinbase only, you don’t need any additional tools. Just pay for TurboTax Premier. TurboTax can connect directly to the exchange and read all your trades. Calculate taxes on all these transactions. No need to pay for additional software.
Free for small amounts: ZenLedger
ZenLedger generates Form 8949 for free for users with up to 25 transactions in a year. The product is competitively priced across all tiers, so any crypto trader should consider it (especially those who have 1,500-5,000 transactions). The product supports all crypto income including staking, rewards, and other sources.
Best for Everyday Traders: CoinLedger
CoinLedger (formerly known as 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.
Best for everything else: TaxBit
Final thoughts on the best crypto and NFT tax software
In 2023, most crypto investors will need a combination of custom crypto tax software and generic tax filing software. TurboTax Premier is the top tax software for cryptocurrency traders this year, but most traders should pair it with custom tax software.
For crypto-focused software, most users should consider ZenLedger, CoinLedger, or TaxBit. However, there may be edge cases where these alternatives offer better functionality or lower cost.