With the number of cryptocurrencies entering the market today, it is not surprising that people worldwide have started to sway towards Blockchain technology. While it is no secret that paying crypto taxes, in particular, is a somewhat tedious process, the rise in the number of free crypto tax calculators has proven to make life easier for crypto investors. Both seasoned professional crypto tax traders and enthusiasts who have just begun learning about cryptocurrencies can benefit from a free crypto tax calculator. That said, beginners need to understand the fundamentals of cryptocurrencies and their legal aspects. 

What is a cryptocurrency?

What is a cryptocurrency

In simple words, a cryptocurrency is an internet-based medium that makes use of cryptographic functions to run financial transactions; read more about what is crypto.

Running on blockchain technology, its most prominent characteristic is the absence of a central authority that governs it. With mainstream forms of income, a central server is placed to prevent double-spending between two entities in a payment network.

However, in a decentralized payment system like this, there exists no such server. Hence, every entity in this network must have a complete transaction list. This is important to make sure that future purchases and sales are valid. Transactions happen only when the private key of the sender signs them.

For example, If you want to transfer bitcoins to someone, your private key would compulsorily have to sign the transaction to make it happen. 

What are its risks?

Before discussing the best cryptocurrency tax software, it is critical to consider the risks of this new currency.

Cryptocurrencies have unique characteristics that make them a force to be reckoned with.

Regardless of what you do, there is no way a transaction can be undone once it is confirmed.

Bank, local, or central authority can only assist if you confirm your transaction. Simply put, Crypto transactions have no safety net.

There is no way to track crypto accounts back to their real-world identities. The bitcoins you receive are on addresses that comprise chains with multiple characters. Although It is possible to analyze the transaction flow, it is impossible to trace the real-world identities.

The transactions may be undoable, but they are secure. As mentioned earlier, the owner of the private key is the only entity authorized to transfer cryptocurrencies. The complexity of the cryptographic functions makes it impossible to hack the system.

The absence of centralization removes the need for permission to use cryptocurrencies. Transferring cryptocurrencies is very easy. All you need to do is download the software. 

The scope of cryptocurrencies

Anyone who has shown interest in cryptocurrencies knows by this point that cryptocurrencies are entirely independent of the influence of the Government. For reasons of irreversibility, non-requirement of permission, and independence from central servers and authority, cryptocurrencies have paved the way for the dawn of a new economy.

Like it or not, cryptocurrencies will likely stay and revolutionize the market beyond our imagination. If you've decided to invest in cryptocurrencies, look at the following free crypto tax calculators. 

A few great free crypto tax calculators

Koinly.io

Koinly is a popular crypto tax calculator today. Given its intuitive user interface, it is ideal for regular traders and beginners. A new user can start using this calculator for free and pay only when he or she has to generate the final reports.

Koinly's reports support just about every accounting method out there. 

CoinTracking

Cointracking is your solution for your crypto tax and portfolio tracking needs. A significant point in its favor is that it is also compatible with a few third-party crypto tax calculators. An example of this is TurboTax. 

Bitcoin.Tax

Widely considered one of the oldest crypto tax calculators, Bitcoin. Tax is a trusted cryptocurrency tax calculator. Old-school cryptocurrency traders and investors often use it. Unfortunately, it looks a little dated compared to its competitors. However, if you're looking for traditional crypto tax software, this is probably the one for you.

BearTax

BearTax has, to its credit, a simple user interface and a design language.

It boasts a variety of features and pricing options.

Like its competitors, BearTax is compatible with popular exchanges and cryptocurrencies. BearTax has promised to introduce new intuitive features in an upcoming update. 

Zenledger

Zenledger is another simple, free crypto tax calculator you can use. You can start for free but will have to choose a paid package after a period of use.

Users can import cryptocurrency transactions and calculate their capital gains and crypto-related income.

The tool does a stellar job generating all the crypto tax-related details like capital gains, income, donations, P&L statements, and, closing reports. 

Conclusion

While making sense of crypto taxes can be confusing and daunting, getting your hands on a free crypto tax calculator will do you wonders. With the increase in the popularity and attention of cryptocurrencies, you can also expect a rise in the number of free crypto tax calculators. If you want to take care of your taxes without unnecessary tension, there has never been a better time.