Compiling five of the best strategies from experts around the crypto tax space with strategies that will help you prepare year round.
Hold Your Investments for Over a Year: If you hold your investments for over a year, you may qualify for long-term capital gains tax rates, which are generally lower than short-term rates. Long-term capital gains are taxed at a maximum rate of 20%, while short-term capital gains are taxed at your ordinary income tax rate.
Use Capital Losses to Offset Gains: If you have capital losses from selling investments, you can use them to offset capital gains. You can use up to $3,000 in capital losses to offset your ordinary income each year. Any remaining losses can be carried forward to future tax years.
Donate Appreciated Assets to Charity: If you donate appreciated assets to a qualified charity, you can avoid paying taxes on the capital gains. You can deduct the fair market value of the asset on your tax return, up to 30% of your adjusted gross income.
Invest in Tax-Advantaged Accounts: If you invest in tax-advantaged accounts such as a 401(k), IRA, or Roth IRA, you can defer paying taxes on capital gains until you withdraw the funds. In the case of a Roth IRA, you can avoid paying taxes on the gains altogether.
Utilize Tax-Loss Harvesting: Tax-loss harvesting involves selling investments at a loss to offset capital gains. You can then reinvest the proceeds in a similar investment to maintain your portfolio's balance. This strategy can help reduce your overall tax liability.
TAX Deadline Tools
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Koinly generates comprehensive tax reports for over 20 countries, built to support each jurisdiction's guidelines. These include Form 8949 for the IRS in the United States, reports for the HMRC in the United Kingdom, CRA reports for Canada, MyGov forms for the ATO in Australia, and many others.
As the crypto space continues to grow and evolve, so too does the need for a reliable tax tool to navigate the headaches associated with getting your crypto taxes done, especially before the deadline.