How Does Koinly Work? A Complete Guide to Crypto Tax Automation

Emma

— 2 min read

Paying taxes on cryptocurrency can be confusing. With multiple wallets, exchanges, NFTs, staking rewards, and DeFi transactions, keeping track of every taxable event manually is nearly impossible. That’s where Koinly comes in.

Koinly is a crypto tax software and portfolio tracker designed to simplify tax calculations and reporting for crypto investors, whether you are a beginner or an advanced trader. Here’s how Koinly works and why it’s becoming one of the most popular crypto tax tools in 2026.

1. Connect Your Wallets and Exchanges

The first step in using Koinly is connecting your crypto accounts. Koinly supports hundreds of exchanges and wallets, including popular platforms like Binance, Coinbase, Kraken, and more.

You can connect accounts in two main ways:

  • API Integration: Koinly automatically imports your transaction history directly from the exchange.
  • CSV Upload: If your platform doesn’t support API integration, you can export your transaction data and upload it to Koinly.

Once connected, Koinly collects your trades, deposits, withdrawals, and transfers, giving you a unified view of your crypto portfolio.

2. Automatic Transaction Classification

Koinly doesn’t just import transactions—it also classifies them. For example:

  • Crypto-to-crypto trades
  • Staking and mining rewards
  • NFT purchases and sales
  • DeFi activities like yield farming or liquidity pools

This automatic classification ensures that taxable and non-taxable events are properly accounted for, saving you from manual calculations and errors.

3. Calculates Capital Gains, Losses, and Income

After importing and classifying transactions, Koinly calculates your capital gains, losses, and crypto income based on your country’s tax rules.

It supports multiple accounting methods:

  • FIFO (First In, First Out)
  • LIFO (Last In, First Out)
  • HIFO (Highest In, First Out)
  • Average Cost Basis

This flexibility ensures accurate tax calculations, regardless of your trading strategy or portfolio complexity.

4. Generate Tax Reports

Koinly can produce ready-to-file tax reports for over 20 countries, including the US, UK, Canada, Australia, and Germany.

Reports include:

  • Capital gains summary
  • Income from staking, mining, and airdrops
  • Transaction history
  • Formatted files compatible with popular tax software like TurboTax and TaxAct

You can preview your tax reports for free and only pay when downloading official documents.

5. Portfolio Tracking and Insights

In addition to taxes, Koinly also functions as a portfolio tracker. You can see:

  • Total holdings across exchanges and wallets
  • Real-time portfolio value
  • Profit and loss analysis
  • ROI for each asset

This makes Koinly a useful tool for both tax season and investment management year-round.

6. Security and Privacy

Koinly uses read-only connections to exchanges and wallets. This means it can view transaction history but cannot move your funds, keeping your crypto safe while calculating taxes.

Final Thoughts

Koinly works by combining automation, accuracy, and simplicity. From connecting wallets and classifying transactions to generating tax reports and tracking portfolios, it removes the stress from crypto tax season.

For crypto investors, NFT collectors, or DeFi users, Koinly is a time-saving and reliable solution that makes tax compliance easier than ever.

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