Bitcoin is popularly known as the first cryptocurrency to grace the market over a decade ago in 2009. It was created by an individual or group of individuals under the pseudonymous name of Satoshi Nakamato. To this day, Nakamato’s real identity seems to be under wraps. Balances are recorded using a public ledger.
Bitcoin employs a network of computers to authorize transactions, and as a result, ensures they are accurate and completely secure. Blockchain is the underlying technology that powers Bitcoin is a sort of distributed ledger. The world of Bitcoin, Bitcoin tax software, cryptocurrencies, and so forth is vast. However, these are some of the fundamentals you ought to be aware of:
What are Bitcoin’s most significant features?
Before getting to the best Bitcoin tax software, here are some exciting features of Bitcoin that set them apart from fiat currencies like the U.S. Dollar (USD):
This happens to be one of Bitcoin’s primary features. Bitcoin is based on a decentralized system. Since Bitcoin uses a cluster of computers to secure and authorize transactions, there is no single point of control, which means that there is a low chance of catastrophic system failure. If there is a failure somewhere within the system, it can be remedied.
As mentioned earlier, Bitcoin works on Blockchain networks. Blockchain is known to be a public ledger that stores all legitimate transactions that are carried out between users. Anyone on the network may access this ledger to view the transactions that are carried out, thereby ensuring complete transparency.
Bitcoin transactions are incredibly fast. You can transfer bitcoins in a matter of seconds in the network, which is not the case with regular banks that typically take a few days to complete transactions.
How does Bitcoin Tax work?
The Internal Revenue Service (IRS) has deemed cryptocurrencies to be property for tax purposes. In other words, gains made from Bitcoin transactions will be considered capital gains. If you purchase a Bitcoin using fiat currencies such as the U.S. Dollar, it is not a taxable event. However, if you use Bitcoins to buy something, it is considered to be a sale of property, which is a taxable event.
If you hold your Bitcoin for less than 12 months before selling it, the gains you make will be considered short-term gains. However, if you hold the Bitcoin for more than a year before you use it for transactions, you will have to pay long-term capital gains. Long-term capital gains generally have a lower tax rate than short-term capital gains.
The Bitcoin Tax Software you ought to know about
Regardless of your experience as a crypto trader, calculating your crypto taxes can be a cumbersome task. It is tedious because you will have to record the price of the Bitcoin at the time of purchase and when you sell it. Additionally, you will need to know how long you have held each Bitcoin, and this can be particularly challenging if you are carrying out hundreds of transactions.
Considering how complicated the process is, crypto companies have developed a variety of Bitcoin tax software to simplify the process of calculating the tax you are liable to pay on your Bitcoin within minutes. There are a plethora of Bitcoin tax software to choose from. Here is our list of the best ones out there:
CoinTracker has made a name for itself as a comprehensive Bitcoin tax software. CoinTracker enables crypto traders to connect to all the leading crypto exchanges, wallets, and so on. It also updates your crypto transactions automatically. Additionally, this Bitcoin tax software can be used to generate tax reports in a matter of minutes.
ZenLedger is undoubtedly one of the easiest-to-use Bitcoin tax software on the market. ZenLedger is capable of many things, including importing and integrating all your crypto transactions, filling out the IRS form 8949, producing profit and loss statements that are easy to comprehend, and so forth. In addition to this, ZenLedger can produce donation reports, capital gain reports, income reports, and closing reports without a problem.
Koinly is popularly known as one of the most intuitive Bitcoin tax software on the market today. This Bitcoin tax software can compute your total Bitcoin tax amount and minimize the tax liability on the assets you have. Just like the Bitcoin tax software mentioned above, Koinly is compatible with just about every leading cryptocurrency exchange on the market. You can expect Koinly to yield accurate tax reports.
Here is another excellent Bitcoin tax software thrown in for good measure. BearTax is considered to be one of the most reliable Bitcoin tax software you can ever hope to use. It enables crypto users to import their crypto transaction data for just about every crypto exchange. It also lets you review and process your crypto transactions. Additionally, BearTax produces essential tax documents that you can use with a Bitcoin tax software of your choice or transfer to your accountant.
These are a few among many Bitcoin tax software that can help simplify the arduous process of calculating and filing your Bitcoin taxes. Be sure to do your research and choose a Bitcoin tax software that best suits your needs and goals.
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