If you traded cryptocurrency or NFTs last year, you're going to need some type of crypto or NFT tax software to help you prepare your tax return.
Only a few short years ago, cryptocurrency trading was unheard of, but today, it's commonplace. As a result, more investors have to report capital gains and other income from cryptocurrency when they file their taxes.
Unfortunately, most traditional tax software companies are ill-equipped to handle the complex taxation on crypto tokens and NFTs. If you're a crypto trader, you need to buy crypto tax software in addition to a traditional tax filing platform. Plus, if you've done anything with NFTs, you'll likely need 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 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 earnings. At this time, TurboTax Premier is the only major tax software that will calculate your tax liability on crypto. However, it only supports transactions that occurred on a few of the major exchanges. If you don’t trade on these exchanges (or you self custody or use DeFi), you must manually calculate the fair market value of your transactions.
Software designed specifically for crypto trading and investing fills in these gaps. Crypto-specific accounting software has been available since 2017, but its importance has grown in the last few years as more people dabble in the digital world of cryptocurrency. Today, more than half a dozen reputable companies can accurately calculate the taxes due based on your trade history.
How Crypto Is Treated By The IRS
The IRS treats cryptocurrency similar to other investment assets. Investors can make or lose money by trading, earning interest, staking rewards, or with cryptocurrency mining. Each type of income (or loss) has different tax implications.
Unlike income paid in a fiat currency, the fair market value of crypto gains, losses, and income isn’t always easy to calculate. Tax filers can determine the proper value by looking up the U.S. Dollar exchange rate at the time of purchase or acquisition and the value at the time of the sale.
Doing this by hand for one to two transactions isn’t a huge deal. However, more transactions mean more work and a higher likelihood that you will need crypto tax software to help.
What Reports Do I Need To File My Crypto Taxes?
Most crypto traders only need to transfer records from IRS Form 8949 to Schedule D. This is the same schedule for reporting stock sales.
TurboTax has a solid support mechanism for transferring crypto trades from Form 8949 to your tax return. Likewise, TaxAct supports adding the form as an attachment.
However, the crypto tax software platforms reviewed below can generate Form 8949 as well as additional reports required to complete other filing reports from non-trading transactions. I've listed a few tax return sections and forms that may apply to crypto investors below:
- Schedule 1: Investors who received gifts (including airdrops) or income from forks or mining income will need to 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. The information from this needs to be transferred to Schedule 1 manually.
- Schedule B: Investors who earned interest or rewards from lending or staking will need to report their investment income on Schedule B. Outside of the crypto world, you would expect to see this information on a 1099-INT or 1099-DIV statement. However, Coinbase issues this information with Form 1099-MISC.
- Schedule C: Investors who mine cryptocurrency may be eligible to take deductions from their taxes. They should report all mining activity on Schedule C. If you receive a 1099-MISC associated with this activity, you can report your income using that. However, most miners will need to use a tool to translate their mining activity into US Dollars.
Unfortunately, each software platform has different requirements for entering and reporting this information. Despite the differences, each software recommended supports these lesser-used options in some way.
Best Crypto And NFT Tax Software
The best crypto and NFT tax software calculates the taxes you owe based on your blockchain activity. Most importantly, these tools calculate capital gains and losses based on your trading activity, as well as income from mining, lending, and staking.
All the companies reviewed here create IRS Form 8949, which calculates capital losses. The information from this form goes on Schedule D in your tax returns.
These software companies also generate reports you can use to report income from interest (or lending rewards) or mining-type activities. You report investment income on Schedule B and mining income (and related expenses) on Schedule C.
We’ve broken down our list into two overarching categories:
- Best DeFi tax support software
- Best CeFi tax support software
Keep reading 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. It emphasizes “smart contracts” and trust in technology rather than business entities. A more significant number of NFTs are produced and exchanged using DeFi. Smart contracts allow individuals to prove the ownership of a unique token (NFT).
In the eyes of the IRS, an NFT is the same as any other token. Fair market value for any NFT is determined based on ETH to USD conversion (or whatever underlying Blockchain supports the NFT). There are other uses for DeFi, but NFT creation and trading are some of the most popular
Note: If you're looking for last year's favorite, TaxBit, shut down during 2023 and is no longer available.
Best DeFi Tax Support Software Overview | |
|---|---|
Best For | Tax Software |
Overall | |
Full Service | |
Value | |
Low Cost For Low Volume Traders | |
Best Overall: CoinTracker
CoinTracker features the best overall experience for tracking your taxes through your web browser or mobile device and makes it extremely easy to generate accurate tax reports. The only major downside is pricing. It’s not the cheapest crypto tax software, but the user interface and ease of use make it our favorite for year-round use.
Tax prep assistance costs $59 to $599 per tax year, though you may get discounts depending on the time you sign up.
Best Full Service: TokenTax
TokenTax is a full-service crypto tax software company. The company specializes in DeFi and other “extraordinary” crypto problems. For example, it helps with forensic accounting based on defunct exchanges. While 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 $149 Premium tier. ZenLedger has preferred integrations 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 it supports DeFi at every level, including the $49 Newbie tier. The company also supports taxes for algorithmic traders with more than 500,000 transactions annually.
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 may transfer tokens off of the exchange into a hardware crypto wallet. But their primary trading activity is done in a centralized location.
At tax time, CeFi traders typically enjoy more straightforward 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 CeFi Tax Support Software Overview | |
|---|---|
Best For | Tax Software |
Coinbase Users | |
Low Volume | |
Everyday Traders | |
Best For Coinbase Users: TurboTax Premier
If you only traded using Coinbase, you don’t need an extra tool. Simply pay for TurboTax Premier. TurboTax can connect directly to the exchange and read all your transactions. It will calculate taxes due on all these trades—no need to pay for an extra piece of software.
Free For Low Volume: ZenLedger
ZenLedger generates form 8949 for free for users with up to 25 transactions in a year. The product is priced competitively at every tier, so crypto traders should consider it (especially people with 1,500-5,000 transactions). The product supports all crypto income, 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 point for many active traders who don’t want to pay extra for support for thousands of transactions. DeFi support and other features are 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 for reviews. That gives us a unique insight into how they work and what you can get. We focus on cost, usability, and other features to help you get your crypto taxes done. Our goal is to offer you unbiased, helpful reviews to get your cryptocurrency taxes completed with the best-value software for your needs.
Final Thoughts On The Best Crypto And NFT Tax Software
In 2024, most crypto investors need the combination of custom crypto tax software AND a typical tax return software. TurboTax Premier is our top tax software for crypto traders this year, but most traders will 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 a lower cost.
Eric Rosenberg is a financial writer, speaker, and consultant based in Ventura, California. He holds an undergraduate finance degree from the University of Colorado and an MBA in finance from the University of Denver. After working as a bank manager and then nearly a decade in corporate finance and accounting, Eric left the corporate world for full-time online self-employment.
His work has been featured in online publications including Business Insider, Nerdwallet, Investopedia, The Balance, Huffington Post, and other financial publications. When away from the computer, he enjoys spending time with his wife and three children, traveling the world, and tinkering with technology. Connect with him and learn more at EricRosenberg.com.
Editor: Colin Graves Reviewed by: Robert Farrington
