In this article, we detail what TaxBit is, how the program works, the different types of plans available to users and the advantages and disadvantages of using the platform. After reading this article, you should be able to make an informed decision as to whether TaxBit suits your individual needs. Read on for the full Taxbit review..
- Worldwide access to the platform
- Range of plans with varying degrees of access to suit individual needs
- Direct tax form auto-fill capability for US investors
- Easy to use, easy to navigate website
- Limited practical use for investors outside of the US
- Yearly cost of the plan may outweigh capital gains for many retail investors
- Limited customer support for those wishing to stay with the free plan
Verdict: Paid plans only seem worthwhile for serious crypto investors with lots of holdings. No harm in trying the free plan first.
In recent years, a global pandemic was seen to bring even the most developed economies in the world to their knees. Consumer trust wavered, and monetary policy aimed at tackling the severe economic downturn that was COVID-19 saw billions of money injected into the economy, the inflationary effects of which are only now beginning to be felt around the globe.
It’s no wonder then that investors, retail and institutional alike, turned to unconventional stores of value and cryptocurrencies once again exploded in popularity. But as with any new technology, crypto is constantly changing and evolving, making it hard for the world, in particular the tax departments of countries, to adjust.
TaxBit makes keeping up with the ever-changing tax laws surrounding cryptocurrency simple for the average Joe investor, and in this article, we take a deep dive into how the crypto tax software works, the benefits and downsides to using it, and some questions commonly asked by existing users in order to help you determine if this software is right for you.
What is TaxBit?
TaxBit1 is a crypto tax software platform that assists users in completing their crypto taxes by compiling all their holdings and transactions, across all exchanges, in one place, and using this database to complete tax forms and tax reports. As the world of crypto regulation is still relatively new and unfamiliar territory for most, TaxBit is a helpful tool to ease the stress on well-intentioned crypto beginners come tax time.
How does TaxBit work?
First, users must sign up to the TaxBit platform, which is an easy process. Step 1 involves TaxBit asking a few questions to determine a user’s tax rate. Then, TaxBit will take users through linking their crypto exchange accounts. Depending on each user’s chosen exchange platform, this could involve a single sign-on or an API key to copy and paste into TaxBit. For any users struggling with this process, TaxBit has guidance material such as written documents and video tutorials.
Once linking is complete, TaxBit will take up to a few minutes to compile tax data for all the user’s crypto transactions, after which the user can view this and see the tax implications of their crypto activity for the year and download any applicable tax forms.
How much does TaxBit cost?
TaxBit offers a range of plans for different user levels, the first being the Network Plan (free). This plan can be considered a free trial (that doesn’t expire), allowing users to familiarise themselves with the platform and add all of their data sources to their account. Unlimited transactions are supported on this plan, however, only on TaxBit Network participating exchanges. You will also only be able to complete a tax form for the most recent tax year and will only have access to customer service via email.
The next level of TaxBit service is known as the Taxbit Basic Plan (US$50 per year). It has all the same features of the Network Plan, plus added support for all crypto platforms and exchanges as well as the option for live chat support.
The Plus Plan is the next step up the TaxBit ladder (US$175 per year). Carrying all of the Basic Plan’s features, the Plus Plan adds further benefits, allowing you to upload all of your crypto data sources in CSV format (with import support available), as well as a “Tax Optimiser” which provides you with ways to either maximise your return or minimise your tax bill. It also gives access to historical tax forms. Further, the Plus Plan also unlocks a Portfolio Performance page and an NFT gallery for NFTs on the Ethereum blockchain.
The most costly TaxBit plan available at $US500 per year is the Pro Plan, which is the Plus Plan, with the addition of a one-on-one meeting with an in-house, crypto tax specialising CPA who will review your tax forms with you and answer any questions. The other additional perk of the Pro Plan is a dedicated team of customer support specialists who provide specialised, priority support to Pro Plan customers.
In what countries does Taxbit work?
TaxBit, with its many plans and benefits, is available for use around the world, with the only issue being the tax form itself, which is set up for users to file tax returns with the USA’s Internal Revenue Service (IRS). This means that international users can utilise TaxBit for purposes such as portfolio optimisation and evaluation, but will likely not be able to use the software to satisfy their government’s tax requirements.
TaxBit’s team says they are looking to change this soon to allow international tax return support. You can contact their support team on the Taxbit website here7 to express your interest and to receive updates as they are available.
How is Crypto taxed in Australia? The USA? The UK?
In most nations around the world, cryptocurrency is treated the same as other investments, such as property or shares, under the Capital Gains Tax (CGT) system. In Australia, CGT is simple: if you have owned the asset for less than 12 months, the CGT rate is the same as your income tax rate. If you have owned the asset for more than 12 months, the CGT rate is 50% of your income tax rate.
If you lose money on an investment in Australia (capital loss), while you cannot use this to directly reduce your taxable income, you can use this to offset capital gains from the same tax year or wait until future tax years to offset future capital gains. Visit the Australian Tax Office (ATO) website for more information about income tax brackets2 and crypto tax laws3.
In the USA, a similar system is implemented by the Internal Revenue Service (IRS) for taxing cryptocurrency. Under US CGT laws, capital gains made on assets owned for less than a year are added to the holder’s income and are therefore taxed at the applicable income tax rate. For investments owned longer than a year, the CGT rate is 0%, 15% or 20% depending on the “filing status” of the holder, which considers household and marital factors.
Fortunately for Americans, capital losses may be used to lower an individual’s taxable income. A limit of $3,000 in deductions per tax year applies, with any additional losses needing to be carried over to future tax years. The IRS provides a comprehensive explanation of CGT laws on their website4.
In the UK, things are done a little differently. While the majority of crypto transactions are taxed as capital gains, His Majesty’s Revenue and Customs (HMRC) allows each UK taxpayer a tax-free threshold of £12,300 in capital gains per year. After this point, all capital gains are taxed at the same rate, regardless of how long the asset was owned. The specific tax rate will depend on the taxpayer’s income band, with the Basic Rate Income Band incurring a CGT rate of 10% and the other 2 bands incurring 20%.
If the taxpayer is seen to be making an income from crypto, as is the case with some DeFi5 transactions, then they will be taxed at the income tax rate applicable to their income band. HMRC goes into more detail about tax on crypto assets on their website6.
Advantages of using TaxBit
TaxBit is a useful tool for many crypto investors, given the following benefits:
– Worldwide access to the platform
– Range of plans with varying degrees of access to suit individual needs
– Direct tax form auto-fill capability for US investors
Disadvantages of using TaxBit
Despite its utility, TaxBit isn’t without its limitations:
– Limited practical use for investors outside of the US
– Yearly cost of the plan may outweigh capital gains for many retail investors
– Limited customer support for those wishing to stay with the free plan
FAQs about TaxBit:
TaxBit’s FAQs, according to the help section7 of their website, include many questions already answered within this article, such as “What plan is right for me?” and “How does TaxBit work?” However, for readers still seeking further information, TaxBit answers these questions with their own articles in addition to providing many “guide” articles for different exchanges that include help with API keys and CSV files.
Is TaxBit legitimate?
TaxBit is completely legitimate and is listed as a verified company with a 4-star rating on Trustpilot.com8, based on 363 reviews. Despite some negative reviews regarding customer service, the reviews overwhelmingly indicate the legitimacy of TaxBit as a business.
How many people use TaxBit?
While TaxBit hasn’t publicly disclosed the number of active users on the platform, throughout early and mid-2021 they raised US$230 million (AU$345 million) from 2 rounds of funding, awarding them a US$1.33 billion (AU$2 billion) valuation. Given these figures, it’s safe to say that TaxBit’s user base is likely in the 6, potentially 7-figure range.
Where are TaxBit based?
TaxBit was founded in Salt Lake City, Utah, USA in 2017 by brothers Austin and Justin Woodward, along with their cousin Brandon Woodward. Their headquarters remains there today.
Is TaxBit worth it?
Ultimately, TaxBit is a user-friendly, comprehensive platform with a range of plan options to suit the needs of many different investors. Superior customer service is available to those willing to pay for it, and those investors based in the US will have access to the most practical application of TaxBit, the IRS tax form integration.
In this article, we have aimed to give you all the information required for you to make an educated decision as to whether TaxBit is right for you. After speaking to your own financial professional, the decision is ultimately yours to make!
So, will you invest in the crypto tax service, TaxBit? Or do you use a different platform for crypto tax services, such as Beartax? Let us know in the comments!
- ‘Individual income tax rates’, ATO. Accessed online at https://www.ato.gov.au/rates/individual-income-tax-rates/ on Nov 29, 2022.
- ‘Crypto asset investments’, ATO. Accessed online at https://www.ato.gov.au/Individuals/Investments-and-assets/Crypto-asset-investments/ on Nov 29, 2022.
- ‘Topic No. 409 Capital Gains and Losses’, IRS. Accessed online at https://www.irs.gov/taxtopics/tc409 on Nov 29, 2022.
- ‘Decentralized finance (DeFi)’, Ethereum.org. Accessed online at https://ethereum.org/en/defi/ on Nov 29, 2022.
- ‘Check if you need to pay tax when you sell cryptoassets’, Gov.UK. Accessed online at https://www.gov.uk/guidance/check-if-you-need-to-pay-tax-when-you-sell-cryptoassets on Nov 29, 2022.