Crypto Portfolio Trackers Can Help You Avoid Tax Trouble. Here Are Some of the Best

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If crypto is giving you another headache this tax season, a portfolio tracker can help you plan now for a better experience next year.

With the rapid surge in crypto adoption over the past year, regulators are taking it more seriously than before, with the IRS even asking Americans for the first time to register their crypto activity.

“The IRS may not yet have the ideal infrastructure to track and evaluate crypto transactions,” says Kate Waltman, a certified public accountant specializing in cryptocurrency. “But what I can tell you is it’s an area of ​​focus.”

If you bought or sold Bitcoin, Ethereum, or other types of crypto last year, you must declare the profit as taxable income. To make things easier for you, tech companies have developed new apps and software that can track what’s in your digital wallet. Meanwhile, crypto exchanges like Coinbase have added new integrations that can help users report accurate holdings

Here’s a look at what crypto portfolio trackers are, along with information to help you decide whether it makes sense to start using.

What are crypto portfolio trackers?

Crypto portfolio trackers are third-party tools that link to your crypto wallets and provide an overview of your crypto holdings. Instead of manually tracking every trade, users can sync their crypto portfolio with their portfolio tracker and retrieve all data holistically, including total gains and/or losses for the respective tax year.

CoinTracker, ZenLedger, and Koinly are a few popular third-party tools crypto investors might want to consider, says Waltman.

For crypto newbies and seasoned traders alike, it’s critical to know your tax position before applying to accurately pay taxes on potential capital gains — or report losses. That’s especially important this year, as 55% percent of Bitcoin investors reportedly started investing in 2021, according to a study by crypto firm Grayscale Investments.

How do crypto portfolio trackers work?

Every app works differently, but the best crypto portfolio trackers track price changes of your crypto assets, show you the total value of your portfolio and determine prices every time you make a trade.

Depending on which one you choose, the tracker can offer different features and integrations. For example, a tracker can sync your transactions across multiple crypto networks and blockchains, meaning it can capture more crypto exchanges than apps that target just one blockchain at a time. It can also sync with popular exchanges (e.g. Gemini) and multiple types of crypto wallets to get an overview picture of your crypto activity.

As with individual stocks or selling physical assets, crypto investors should expect to pay capital gains tax when they profit from the sale of virtual currencies. What makes crypto different is the lack of consistent reporting by exchanges to the IRS – although there have been signs over the past year that more regulations could help clarify this in the future.

One thing that is clear is that the more trading activity you have, the more complicated the tax return can be, especially if you manually track your activity. Portfolio trackers can help investors maintain accurate records so you can be sure you’re paying the correct tax rate based on your activity.

“If you had [your crypto] for less than a year, you would have a short-term profit and would be taxed at your normal normal tax rate,” explains Lisa Greene-Lewis, a certified public accountant and TurboTax tax expert. “If you had it for more than a year, then you pay long-term capital gains tax, which is more beneficial for most people.”

How do I track my crypto portfolio in 2022?

Experts say that the best crypto tax programs can be integrated into multiple wallets, exchanges and/or blockchains – plus they are compatible with mainstream tax programs such as TurboTax or TaxAct.

Waltman and other tax experts we spoke to recommend CoinTracker for its tools and integrations. When in doubt, talk to a certified public accountant who specializes in crypto taxes.

While experts say it’s easy for those who have simply traded crypto on online exchanges to include crypto in your tax return, you may want to consult an expert if you have mined crypto or engaged in decentralized financial trading (including staking, pooling and/or trading). or lending your cryptocurrency).

Not sure where to start? Read NextAdvisor’s crypto tax guide.

What are the best crypto portfolio trackers?

Crypto is a fast growing industry and there are a multitude of new products for tracking your assets and transactions. You should consider fees, user ratings, wallet integrations, and cross-blockchain capabilities when deciding which crypto portfolio tracker is best for you.

Pro tip

Thoroughly compare the differences between free plans before choosing to pay for a crypto portfolio tracking service. Some free options offer robust IRS reporting. Others let you track a large number of transactions, but skip the necessary forms.

Some trackers may charge more for transactions, so you’ll want to factor that into your total tax preparation costs. Either way, it doesn’t hurt to work with your accountant and go through everything. “You can use third-party calculators to upload your wallet data and try to determine the capital gains loss for you,” Waltman says. “It’s always good to review and thoroughly check your data line by line. Make sure you agree, even if you use a third-party service provider to do the calculation.

In general, experts recommend sticking to crypto companies and platforms that are more established and with larger user bases, rather than smaller, niche service providers. That can be a good indication that the service offered will pay off for investors. Also keep in mind that many crypto companies are startups, so their product offerings and prices may change with the rapid growth of the crypto industry.

With all this in mind, here are five of the best options crypto investors should consider. This list is not exhaustive, but it can help you think about what to prepare for when reporting your crypto holdings for 2021. Each tracker offers different options so you can consider what’s important to you.

CoinTracker

Highly recommended by experts, CoinTracker offers the ability to sync well with IRS forms as well as TurboTax and TaxAct. But you do have to pay for more advanced features.

Cost:

$0 for up to 25 transactions $199 for 1,000 transactions Customized pricing for unlimited transactions

Pros

Ability to export your transactions to a CSV spreadsheet

Provides tax forms, export to tax preparation software, and referral from tax advisors (additional fees apply)

Calculates cost base and capital gains

Forum support included with the free version

30-day money back guarantee

TokenTax

While TokenTax does not offer a free version, it does support live chat and unlimited tax form revisions. The premium plan ($199) and higher plans also offer a comprehensive tax loss harvesting dashboard, which shows you unrealized losses that you could sell to offset your gains – avoiding expensive surprise bills.

Cost:

Starts at $65 for up to 500 trades $199 for up to $5,000 trades $799 for up to 20,000 trades $3,500 for custom VIP support

Pros

Autofill IRS Form 8949 or International Report

Live chat support

Unlimited Tax Form Revisions

10% discount when buying several years

CoinLedger (CryptoTrader.Tax rebrand)

CoinLedger allows you to sync unlimited exchanges and view profit and loss calculations, but the system does not offer a free plan.

Cost:

$49 for up to 100 trades $99 for up to 1,500 trades $199 for up to 5,000 trades $299 for unlimited trades

Pros

14 day money back guarantee

Can sync unlimited exchanges

DeFi support included in the basic plan

Calculates profit and loss

Includes six tax forms: IRS Form 8949, income report, capital gains report, year-end positions, audit trail report, and tax loss harvesting

ZenLedger

While NFT support starts with the $149 plan, ZenLedger can integrate with TurboTax and analyze your current holdings.

Cost:

$0 for up to 25 transactions $49 for up to 100 transactions $149 for up to 5,000 transactions $399 for unlimited transactions

Pros

Analyze your current portfolio performance and positions

Track real-time prices

Unlimited exchanges included in the free plan

Includes support for crypto earnings, donations, ICO purchases and donations

Includes tax loss harvesting, referrals from third-party crypto tax advisors (additional fees apply) and full tax report preparation (additional fees apply)

Koinly

Koinly alerts you if your balance goes negative and provides CSV spreadsheets of your trades. But for most of the features, you need the $49 subscription.

Cost:

$0 for up to 10,000 transactions (limited tax returns, however) $49 for 100 transactions $99 for 1,000 transactions $179 for 3,000 transactions $279 for more than 10,000 transactions

Pros

Import/export transactions as CSV spreadsheets

6,000+ cryptos supported

6+ years of historic spot prices

Negative Balance Alerts

Additional tax and reporting features for paid subscriptions

Learn more: Here are 6 questions you might want to ask your tax advisor

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