One benefit of a market downturn: You can save a TON of $$$ on your tax bill for next year with this one simple crypto tax loop hole.
How?
Read on, and let's break it down 👇
🧵..
How?
Read on, and let's break it down 👇
🧵..
1/ If you sell or trade your crypto when it is below the price you originally acquired it for, you incur a capital loss.
Capital losses get deducted from capital gains on your taxes, and overall, they reduce your taxable income for the year.
Capital losses get deducted from capital gains on your taxes, and overall, they reduce your taxable income for the year.
2/ E.g. Let's say you bought #bitcoin at $55,000 a month ago. If you sold or traded that BTC at market prices today ($32,000), you would lock in a capital loss for the year and significantly lower your taxes.
3/ But it gets even better:
Because the IRS classifies cryptocurrency as property and NOT as a security, "wash sale" rules do not apply to crypto as they do for stocks.
This means you can buy the BTC that you sold back immediately and still realize the capital loss.
Because the IRS classifies cryptocurrency as property and NOT as a security, "wash sale" rules do not apply to crypto as they do for stocks.
This means you can buy the BTC that you sold back immediately and still realize the capital loss.
4/ This is even MORE important if you have incurred gains earlier this year.
Remember, capital losses deduct from capital gains on your tax return during the year they were realized.
So if you've already "realized gains", you should take losses if possible to offset these gains
Remember, capital losses deduct from capital gains on your tax return during the year they were realized.
So if you've already "realized gains", you should take losses if possible to offset these gains
5/ E.g. Let's say you traded ETH for $MATIC at the height of the market. In doing this, you realized a taxable event and likely huge taxable gains as ETH was at all time highs.
However, now your $MATIC is underwater (worth less than you got it for).
However, now your $MATIC is underwater (worth less than you got it for).
6/ So, if you sell out of $MATIC today, and then immediately buy it back, you will realize losses and offset a lot of those gains that you realized from your trade of ETH to $MATIC
This could save you a TON on your taxes. One of our customers reduced his tax bill by $43,000!
This could save you a TON on your taxes. One of our customers reduced his tax bill by $43,000!
7/ This is a process known as Tax Loss Harvesting, and it's a strategy rich people use all the time to lower their capital gains tax bill every year
cryptotrader.tax/blog/cryptocur…
cryptotrader.tax/blog/cryptocur…
8/ If you don't want to figure all of this out yourself, you can simply sign up for a free @CryptoTraderTax account and let the software do it for you!
Simply connect your exchanges and see which of your current positions have the highest tax savings opportunities!
Simply connect your exchanges and see which of your current positions have the highest tax savings opportunities!
9/ So in summary:
Take a look at your current positions and see if there is any opportunity to "harvest" losses.
Doing this proactively can lead to HUGE tax savings for next year.
Take a look at your current positions and see if there is any opportunity to "harvest" losses.
Doing this proactively can lead to HUGE tax savings for next year.
10/ Crypto tax questions? Let us know below and we will get to them! 👇
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