News

If you interacted with crypto during 2024, a crypto tax software is a must-have tool for you to calculate your cryptocurrency gains and losses in this tax season.

LONDON, ENGLAND – JANUARY 09: In this photo illustration, a visual representation of the digital … [+] Cryptocurrency, Bitcoin is seen on January 09, 2024 in London, England. Bitcoin investors are expecting the U.S. Securities And Exchange Commission (SEC) to issue a decision soon on whether to grant Bitcoin “exchange-traded fund” (ETF) approval, which would allow people to invest in Bitcoin without having to buy it on a crypto exchange like Coinbase or Binance. The price of Bitcoin has risen in anticipation of such approval. (Photo illustration by Dan Kitwood/Getty Images)

Getty Images Cryptocurrency exchanges are different than traditional stock brokers like Fidelity or JPMorgan. These brokers issue a consolidated Form 1099-B listing all your annual proceeds, cost basis and gains/losses from stock transactions. However, crypto exchanges like Coinbase & Gemini are not required to issue such tax forms for the 2024 tax year. Therefore, the burden of properly calculating gains and losses to be reported on the tax return falls on you.

(Note that crypto exchanges will be required to issue a Form 1099-DA starting the 2025 tax year)

How Does Crypto Tax Software Work? Crypto tax software aggregate transactional data across all your wallets & exchanges, reconcile activity, and compute gains and losses by applying the right tax rules. These software charge an annual subscription to perform this service.

Once all the transactions are reconciled, these tools help you generate Form 8949, Schedule D, and Schedule 1 reports, which you can file with your general tax filing software like TurboTax or H&R Block.

MORE FOR YOUFBI Warns Chrome, Safari And Edge Users—Do Not Use These WebsitesNYT ‘Strands’ Today: Hints, Spangram And Answers For Monday, March 17thLying In Wait On The Ground, Russia’s Best Attack Drones Devastate Ukrainian Convoys For the naked eye, all these platforms may look like a good solution. However, not all platforms are made the same. Since there are many choices, below is a list of items you should look at when picking the right crypto tax software tool for the 2025 tax season.

Integrations Quality The number one item you should look at when selecting crypto tax software is the number of integrations. There are mainly two types of integrations: Application Programming Interface (API) import & Comma Separated Values (CSV) import. API is the most seamless and accurate way to import your wallet & exchange data into a tax platform. This may sound very technical, but the process is really simple. You just have to copy the API key (Read-only access) from your exchange/wallet and paste it on the crypto tax software platform. Once this is completed, the platform automatically downloads all the transactions and reconciles them.

CSV imports are a bit inconvenient and can be time-consuming. It involves downloading the transaction history reports in CSV format and uploading them into the crypto tax software. In some cases, you will have to edit this transaction history report to comply with the format required by the software platform. You may also encounter more bugs in this process compared to API import. Therefore, the more API integrations a platform has, the more seamless and easier your life will be.

Volume Handling Volume (the maximum number of transactions a platform can process without crashing) is another important question to ask. If you have transactions in the high hundreds of thousands or in the millions, choose a platform that can confidently handle the volume. High volume handling capabilities may not be directly advertised on the website, but look into the fine print or ask the customer service before purchasing to avoid headaches.

Features & Accuracy Check the platform’s user interface for features such as the ability to manually edit transactions and mark transactions under different labels. Crypto transfers between your own wallets & exchanges are non-taxable. Good platforms can automatically detect these and mark them as non-taxable. Most tax platforms come with handy portfolio tracking tools. This feature allows you to see the market value of your portfolio.

Starting Jan 1, 2025, the IRS required you to track the cost basis under the Per-wallet accounting method (as opposed to Universal tracking). Make sure that the platform supports this feature. If the platform doesn’t support this, your calculations may be out of compliance.

Credibility & Legitimacy Since crypto tax software is an emerging space, checking the credibility and legitimacy of the software you use is super important. At the end of the day, you will be liable for the amounts reported on your tax return, so you should do some due diligence when picking the right software provider.

Check if the team has any members from the tax compliance/regulatory space. Teams with only technologists may lack some of the tax expertise and real work experience. Ask the platform(or search on Google) about the initiatives they have taken with the IRS & other regulators to prepare themselves for the upcoming 1099-DA regulations. Have they successfully helped taxpayers in defending the amounts reported by their platform? What kind of trade and industry organizations are they affiliated with? What kind of media presence do the company and its members have?

Pricing Almost all platforms have pricing tier based on the number of transactions you have in a given tax year. Make sure the pricing is within your budget. You can also get advantage from platforms that provide free accounts when you have a small number of transactions.

Other Perks Look for other perks that come with the subscription. In addition to gain/loss reconciliations, some software platforms offer perks like educational webinars, tax planning tools, referral discounts and customized support services.

Properly calculating your crypto gains & losses and producing the right forms is your responsibility. In order to meet your filing requirements, you should definitely leverage a reputed crypto tax software by assessing the criteria mentioned in this article.

Disclaimer: this post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.