How is cryptocurrency taxed during tax season?

Tax season is here and the new federal tax deadline is May 17th. It’s a very busy time for the cryptocurrency industry, but one of the questions I hear most often right now is how do people handle cryptocurrency taxes?

Last summer, DeFi was a craze, and many people made a lot of money. Therefore, tax platforms must be able to accept Ethereum addresses and integrate these different DeFi protocols. The first useful tip is that in addition to Ethereum addresses, you should also link all past accounts on centralized exchanges so that the cost basis will become more accurate.

I have used the services of three cryptocurrency tax software vendors in the past and I wanted to share some of my thoughts on each one to help you out. The following companies are listed in no particular order:

1. TaxBit

The company just raised a massive $100 million funding round, so it should be fairly well capitalized.

The user interface is more like traditional enterprise and takes longer to load.

The tool itself seems to track trades fairly well, but you may still need to verify the cost basis with past trades.

Both the portfolio view and the tax optimizer have been helpful to me.

The company provides good customer service and is responsive.

The fee ranges from $50 to $500 per year, depending on the number of transactions.

2. CoinTracker

The company, which spun out of Y Combinator, received $1.5 million in seed funding a few years ago.

The user interface is very organized and Silicon Valley-esque, probably the best of the three companies.

The dashboard is very comprehensive, with a portfolio area that allows for deeper analysis of your positions, and two sections that are very similar to mainstream DeFi tools such as Zapper and Zerion that stand out from the competition, which are mainly tax tools.

Tax Tools was the least accurate of the three companies, but provided solid customer service.

Tax tools cost between $0 and $399 per year, depending on the number of trades, and you can pay for a portfolio assistant to help manage your portfolio and implement a loss-harvesting strategy for just $99 per month.

3. TokenTax

The company grew on its own without raising any capital.

Among the three companies, its user interface is probably in the middle, being very straightforward and concise.

The tax tool is comparable to TaxBit in terms of accuracy, perhaps a little more accurate than the latter.

Tax tools range from $65 to $799 per year, and VIP services cost $2,500 per year, which include advanced reconciliation services.