Considering the amount of attention and interest that are being shown to cryptocurrencies in today’s world, it is vital to have a fundamental understanding of the primary aspects of cryptocurrencies that include crypto taxes, and cryptocurrency tax calculators.
In today’s post, we will learn about cryptocurrency and their taxes, why and how can you file taxes and the best crypto tax calculators you can use. So, let’s get started.
What is Cryptocurrency?
Cryptocurrency is fundamentally is a digital medium of exchange that employs robust cryptographic functions to verify and secure financial transactions.
It is best known as a currency that operates in the absence of a central regulatory body. In other words, there exists no central authority that monitors and regulates cryptocurrencies, which is not the case with conventional fiat currencies like the U.S Dollar (USD).
Cryptocurrencies operate using Blockchain technology. Every component in the Blockchain contains a list of all the transactions that occur.
These transactions can occur only when the private key of the sender signs them. For instance, if you were to transfer Bitcoins to someone, your secret key would have to approve this transaction to make it happen.
When and How to file Crypto taxes?
The thought of filing crypto taxes has made potential crypto traders opposed to the world of cryptocurrencies altogether. Here’s what you need to know about crypto taxes.
Crypto is considered an asset for tax purposes. This means that your cryptocurrency transactions are subject to capital gains, as-is property. You need to report your capital gains on form 8949. There are two types of capital gains tax – short-term, long-term, depending on how long you have your cryptocurrency.
When should you pay your Crypto Taxes?
The following scenarios will require you to pay crypto taxes –
- Selling your cryptocurrencies for fiat currencies
- Trading your cryptocurrencies for other cryptocurrencies
- Making use of your cryptocurrencies to purchase goods and pay for services
When should you not pay your Crypto Taxes?
You do not have to pay crypto taxes in the following scenarios –
- Donating your cryptocurrency to tax-exempt charities or organizations
- Transferring your cryptocurrencies among your wallets
- Purchasing a cryptocurrency using a fiat currency
- Sending small amounts of the cryptocurrency as a gift so long as they do not exceed $15k
- Lending your cryptocurrencies
Why should you use Cryptocurrency Tax Calculators
It is no secret that calculating crypto taxes is an arduous task for amateur crypto traders and grizzled veterans alike. It can only become more tedious with the increase in the number of crypto transactions.
Fortunately, there are a plethora of cryptocurrency tax calculators at your disposal to help remedy this situation.
Cryptocurrency Tax Calculators Worth looking into
TokenTax:
TokenTax is known as one of the best cryptocurrency tax calculators to grace the market. It is known to support every exchange there is. Here are some features worth noting:
- TokenTax allows you to generate tax forms like the Form 8949 for your return or to import into TurboTax. It uses your crypto trading history to populate your form 8949 automatically.
- TokenTax allows you to seamlessly track your capital gains, capital losses, and tax liability for every cryptocurrency transaction.
- It can be used in just about every country. Some countries that support TokenTax are the United States, Canada, United Kingdom, Germany, Sweden, and Japan.
- Its tax-loss harvesting dashboard shows you precisely what your unrealized gains and losses are.
ZenLedger:
ZenLedger is another stellar cryptocurrency tax calculator you should consider using. Here are some of its features:
- It works with all exchanges, as well as all crypto and fiat currencies, examples of which are Bitcoin, Ethereum, Litecoin, Dollars, Euros, Pounds Sterling, Yen, etc.
- It imports your transactions and prepares the required documents that include the donation, and closing reports, capital gains reports, income reports,
- ZenLedger produces profit and loss statements for you and your CPA. You do not have to worry about over-paying taxes regardless of whether you are a miner, day trader, or Hodler.
CryptoTrader.tax:
This cryptocurrency tax calculator helps its crypto traders calculate their capital gains or loss in a matter of minutes. CryptoTrader.tax makes it easy to import your trades and ensure you are not overpaying your taxes.
You can download your completed IRS forms to file yourself, send it to your accountant, or import it into software such as TurboTax and TaxAct. Make sure that each tax report includes the following:
- Cryptocurrency Income report
- Long-term and Short-term sales report
- TurboTax Direct Import
- End of Year Positions Report
- Audit Trail Report
- IRS Form 8949
- TaxAct Direct Import
Its built-in tax-loss harvesting tools enable you to reduce your capital gains. CryptoTrader.Tax also boasts international tax support. It can calculate your profits and losses using every fiat currency.
CoinTracker:
CoinTracker stands out as one of the most trusted cryptocurrency tax calculators and portfolio trackers. Here are a few features that enable it to stand out in the eyes of the crypto trader –
- You can quickly review your tax summary and download the reports needed to file your taxes. It is seamlessly integrated with TurboTax.
- You can track your crypto portfolio. CoinTracker supports fee tracking and margin trading.
- To simplify your endeavors as a crypto trader, it makes use of a unified dashboard. In addition to this, it provides a performance tracker, which is likely to bring you significant clarity about your crypto investment performance over time.
As a crypto trader, you can count on these cryptocurrency tax calculators to help you navigate the crypto world with ease, regardless of your experience level.
Last Words:
That’s all about Cryptocurrency Tax Calculators. Which one did you like the most? Let us know.
I hope I was able to clear all your doubts regarding this. If you still have further queries, don’t forget to comment below, I will be happy to help. If you love reading our posts, do share them with your friends. I will be back soon with another exciting update. Keep following HiTricks.
Nirmal Sarkar is a Biotechnologist from the city of Joy, Kolkata. He is the founder of this blog and covers a wide range of topics from Gadgets to Software to Latest Offers. You can get in touch with him via nirmal@hitricks.com
