TokenTax is a Crypto-first tax filing company. The company specializes in crypto tax optimization and it has a stand-alone product that calculates the taxes due on crypto transactions.

In addition to the stand-alone product, the company offers full-service filing including back-tax filing for crypto traders who have inaccurate data going back to 2014.

If you have a complicated crypto tax situation, TokenTax may prove to be valuable to you. Here’s what you need to know about it.

Some Crypto Tax Basics

The IRS treats crypto tokens and NFT like securities (think stocks). When you buy or earn a token, that token has a cost basis. The cost basis is the value of the token (in $USD) at the time of purchase. People realize capital gains and losses when they sell or trade the tokens.

The gain or loss realized depends on the value of the token at the time you sell it. For example, a trader purchased 10 BTC on January 1, 2019. At the time, BTC was worth $7,175.50. The trader’s cost basis in this transaction is $71,755. This is the cost basis, even if the trader paid using another token.

This trader sells all 10 BTC on July 20, 2021, for $29,789.94 per token. The amount realized is $297,899.40. The IRS considers this amount realized, even if the trader receives payment in the form of another crypto token. On this transaction, the trader incurs a long-term capital gain of $226,144.40. The IRS will tax the trader on this basis.

Crypto tokens are also eligible for tax-loss harvesting. That means you can use realized capital losses (from selling tokens that have depreciated in value) to offset some or all of your realized capital gains.

For most traders, there crypto transactions will be taxed as investments in the ways described above. However, it should be noted that there are also times that cryptocurrency can be taxed as ordinary income as well. Examples would include if you received crypto for mining or staking or as interest on a loan.

What Is TokenTax?

TokenTax is a tax filing company that offers tax-filing services in 18 countries including the United States. Founded in 2017, the company offers both full-service filing, and a standalone application that calculates taxes for crypto transactions.

As a tax-first company, TokenTax specializes in tax minimization strategies including tax-loss harvesting. It also builds in IRS-compliant logic related to margin trading and other aspects of crypto trading.

Users who opt to use TokenTax can generate Form 8949 for cryptocurrency. Or they can have TokenTax file their complete return for them.

TokenTax - Is It Free?

TokenTax does not offer any free version. Users must pay for a specific tax year before they can start using the service.

What’s New In 2022?

TokenTax now allows users to create accounts without paying for the software. This allows curious people to gain an understanding of the look and feel of the software without filing.

Aside from this upgrade, the software does not appear to be dramatically changed from previous years. The company still supports manual data entry and CSV uploads from exchanges that don’t have API connections.

Does TokenTax Make Tax Filing Easy In 2022?

The TokenTax software will ease tax filing for crypto traders. The software automatically calculates capital gains and losses and recommends tax-loss harvesting options. This allows traders to gain the benefits of tax minimization strategies without all the effort.

DIY tax filers who use TurboTax will be happy to learn that TokenTak integrates directly with the tax filing software. And unlike nearly all of its competitors, TokenTax also has a CPA and full tax filing team available for hire.

TokenTax's tax experts can not only file your taxes on your behalf, but can provide “white glove” service if you need help piecing together past gains and losses based on defunct exchanges. While extraordinarily expensive, this is a service that most accountants simply don’t offer.

TokenTax Notable Features

TokenTax is a tax-first crypto accounting company. It will file your entire return, or create reports for you to file on your own. These are some of the most important features.

Imports From Every Exchange

TokenTax says that it's the "only cryptocurrency tax calculator that connects to every crypto exchange." Dozens of exchanges, including the ones shown in the screenshot below, can be connected directly via API.

But even if API integration isn't available, TokenTax can still import your trade data. All you have to do is upload a CSV file from your exchange. If TokenTax's software can't automatically process the report, its human staff members will personally take care of adding the trades to your account.

Tax-Loss Harvesting

TokenTax works to minimize users’ tax burden by creating opportunities for tax-loss harvesting (where legal). This focus allows traders to take advantage of some of the times that trading didn’t work out.

Supports Margin Trading

TokenTax supports margin trading and offers API integrations to most exchanges that support margin trading. Users unlock some margin trading support at the Premium level, but may need to upgrade to Pro depending on the exchanges they used.

TokenTax Notable Drawbacks

TokenTax offers an excellent user experience, and it offers solutions for crypto traders using sophisticated techniques (like margin trading). However, the software isn’t perfect. These are a few drawbacks.

No Free Trial

TokenTax doesn’t offer a free trial. To start using the software, you need to pay. With super-high prices, this can be a waste of money if the software doesn’t do what a user needs it to do.

API Integration Locked At Certain Levels

TokenTax does not universally unlock API integrations. The most common exchanges are unlocked at the Premium level but others are not unlocked until the VIP tier.

Steep Increases In Price

TokenTax has a competitive $65 pricing tier (though it only supports Coinbase), but prices increase steeply after that. Users who want to access all margin exchanges via API will have to pay $799 per tax year.

Depending on how many transactions you've done, you could quickly find yourself in the $799 tier.

TokenTax Online Pricing Plans

TokenTax charges fees based on several factors. Each tier unlocks more trades, more API connections to exchanges, and different tax minimization strategies. The VIP level includes consultations with crypto tax experts who can help figure out tricky issues related to defunct exchanges.

How Does TokenTax Compare?

TokenTax is one of the only crypto tax prep companies that can offer full service if needed. That said, the VIP pricing tier (which includes the hands-on support) is very expensive. Tax filing itself requires a custom quote. Because of the high prices, almost all tax filers will opt for TokenTax’s less expensive options.

Overall, TokenTax’s Basic tier is a poor value relative to the competition. On this tier, Coinbase users who have fewer than 500 trades can use TokenTax’s Basic package. However, users can just as easily pay TurboTax one time and connect to CoinBase.

At higher levels, other companies support more trades for lower costs. TokenTax offers specific support for margin trading, but other companies including CryptoTrader.Tax also supports margin trades. From a value perspective, TokenTax largely doesn’t make sense.

However, anyone with back taxes that needs help reconciling old transactions should consider TokenTax’s VIP service. Paying $2,500 for hands-on help sounds too high, but few other companies can provide this service.