Why Do I Need Crypto Tax Software?

April 22, 2022
Knowledge Center » Blog » Why Do I Need Crypto Tax Software?

If you hold or trade cryptocurrencies, you may be liable for taxes. Crypto tax software can help you calculate and file your crypto taxes.

There are different types of cryptocurrencies, each with its own benefits. Bitcoin, for example, is the original cryptocurrency and is widely accepted as a form of payment. Ethereum is a popular platform for creating decentralized applications. Litecoin is a faster and more lightweight version of Bitcoin.

A few other popular cryptocurrencies are Bitcoin Cash, Ripple, and Monero, each bringing unique benefits and value to those who trade, hold, and stake them.

There are, of course, different ways to earn crypto includeing mining, trading, and earning interest on your crypto holdings.

You may need to report your cryptocurrency holdings to the IRS depending on how they were acquired and their value.

Different transaction types crypto users can find themselves with

There are different ways to earn crypto, such as mining, trading, or earning interest on crypto deposits. If you receive crypto as income, you will need to report it on your taxes.

Cryptocurrency mining is the process of verifying and adding transactions to the public ledger. Miners are rewarded with crypto for their work.

Mining pools are groups of miners who work together to mine crypto.

Cloud mining is a way to mine crypto without having to set up your own mining equipment.

Trading crypto refers to buying and selling crypto on an exchange. You may need to pay taxes on any gains from trading crypto. However, tracking your gains and losses can also result in a tax savings for you. For example, if your net cryptocurrency trades in a given year resulted in net losses, you can actually save money come tax time as this capital loss reduces your overall reported income.

Earning interest on crypto deposits is a way to earn passive income from your crypto holdings. You will generally need to pay taxes on any interest earned.

With the new world of cryptocurrency and the constant change native to the space, these are just a few of the tax and transaction scenarios that cryptocurrency holders can find themselves in come tax time.

Understanding the benefits of crypto tax software

Crypto tax software can help you track your crypto holdings and transactions. This can make it easier to file your taxes and avoid penalties. It can also help you with all of this by calculating taxes owed and filing tax returns. This can save you a lot of time and hassle in dealing with crypto taxes.

If you hold or trade cryptocurrencies, this software also helps you stay compliant with tax laws and ensures you don't get audited down the line.

With all that being said, if you do decide to jump into this world of crypto and even pick yourself up some tokens or NFTs, you need to make sure that you have the proper tools on hand to help you manage your financial accounting needs. One of the best solutions for you will be Ledgible.

With Ledgible, you can report and keep track of your crypto transactions with the supported integrations as you dive into the crypto space with this new information. If you want to learn more about Ledgible and get started for free, click here.

About Trevor English

Trevor is a technology journalist & engineer who has made a career out of engineering and technical communication. His work has appeared on Curiosity, BBC, Interesting Engineering and other sites across the web. Originally the Chief editor for Interesting Engineering back in 2016, he now works with software & tech companies, aiding them in content marketing and technical communication. Currently living in Texas, he’s also a published children’s book author and producer for the YouTube channel Concerning Reality.

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