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Wondering how to save tax on your cryptocurrency? Well, there’s both good news and bad news for you.
While you can’t completely avoid paying taxes, the good news is: there are multiple ways to legally minimize crypto taxes and reduce your tax burden.
In this article, we share all the details about crypto tax that you need to know and seven simple strategies to minimize it.
As per IRS, cryptocurrency is considered a property which makes it subject to both income tax and capital gains tax. A tax of up to 37% on crypto income and short-term capital gains and between 0% to 20% tax on long-term capital gains is applicable. The final tax amount depends on various factors including how long you have held the assets, your earnings, and the type of crypto transactions you are making.
Let’s discuss both types of applicable taxes in detail.
Not all crypto transactions are taxable. Here are five scenarios when you do not need to pay taxes on your crypto:
Now that you know how crypto is taxed, let’s dive into seven effective ways to help you save tax on cryptocurrency.
The best way to avoid any capital gains taxes is to HOLD your crypto. Even if you plan to dispose of your crypto, it’s important to note that the longer you hold your assets, the less taxes you need to pay. Remember, long-term capital gains where you have held your crypto for more than 12 months are subject to only 0-20% tax as opposed to 37% tax for short-term capital gains.
If any of your crypto assets have depreciated in value, you can sell them at a loss to save taxes on your overall bill. This process is also known as tax loss harvesting and is a great way to minimize crypto taxes, especially if your capital gains are high. For instance, you have a total capital gain of 2000$. To reduce your crypto tax bill, you sell a few of your crypto assets at a loss of 2000$ and offset your capital gains while calculating taxes.
Taking out loans with your stocks as collateral is a great way to cash out your profits without paying taxes. The good news is, the same strategy can be applied to your crypto assets. Since crypto is considered a form of property as per the IRS, you can use them to borrow money without triggering any taxation. Consider the loan interest rate and your personal income to make the best decision.
You can gift crypto to your family and friends for up to 15000$ to avoid applicable taxes. If the gift value exceeds the mentioned amount, you simply need to submit a gift tax return form, primarily for informational purposes. This way, you not only enjoy your crypto assets tax-free but the recipients also do not have to pay any taxes until they sell it for a profit.
This is one of the ways to dispose of your crypto without being taxed. This is also a great way to contribute to a positive cause while receiving tax benefits. If you have held your cryptocurrency for more than a year, the fair market value at the time of donation can be deducted from your tax return.
You are now already aware that long-term capital gains are subject to 0-20% taxes. But did you know the tax rate for crypto sold after a year is 0% for investors who earn less than $41,676 including crypto income? This idea can be used strategically to avoid your capital gains tax completely. Consider cashing out your profits during years when your income bracket is lower than the above-mentioned threshold to save on your tax bill.
Calculating taxes on all your crypto transactions manually can be tedious. It’s difficult to keep track of the US dollar exchange rate at every point of the year and figure out how it relates to your transactions. This may lead to calculation errors or make you lose money as you may overlook tax-saving opportunities such as leveraging HIFO accounting, or tax-loss harvesting when applicable. The best way to ensure you calculate your crypto taxes the right way and reduce taxes on cryptocurrency is to use automated crypto tax software like Kryptos. You do not need to spend hours tracking all your transactions – simply auto-sync all your wallets and exchanges to generate free tax reports in seconds. All these reports comply with your local laws and utilize tax-saving strategies to give you the best result, stress-free.
All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!
| Country | Issue | Kryptos Use Case |
|---|---|---|
| India | Cryptocurrency transactions are taxed as capital gains, with evolving legislation creating uncertainty. | Kryptos.io streamlines the process by automatically tracking transactions and computing capital gains, adjusting to new regulations for precise reporting. |
| Brazil | Cryptocurrencies are subject to capital gains tax and must be reported, posing challenges with complex requirements. | Kryptos.io simplifies compliance by offering real-time transaction tracking and detailed tax calculations, making it easier to meet Brazil’s tax obligations. |
| Nigeria | Regulatory framework for cryptocurrencies is evolving, with uncertainty around taxation and restrictions from the Central Bank. | Kryptos.io provides an adaptable solution by maintaining detailed records and generating flexible reports, helping users stay compliant despite regulatory changes. |
| USA | Cryptocurrency transactions are subject to capital gains tax, with detailed IRS reporting requirements. | Kryptos.io enhances compliance by automating the tracking of transactions and generating comprehensive tax reports, facilitating adherence to IRS requirements. |
| UK | Cryptocurrencies are taxed under both capital gains tax and income tax, requiring careful tracking and reporting. | Kryptos.io aids UK users by monitoring both capital gains and income from crypto transactions, ensuring accurate and straightforward tax reporting. |
| Australia | Cryptocurrencies are subject to capital gains tax, and users must report their gains and losses to the ATO. | Kryptos.io assists Australian users by providing seamless transaction tracking and precise capital gains calculations, ensuring efficient compliance with ATO reporting requirements. |
| Germany | Cryptocurrencies are taxed as private assets with gains subject to tax if held for less than a year. | Kryptos.io supports German users by tracking holding periods and computing taxes on cryptocurrency transactions, ensuring adherence to German tax regulations. |
| Japan | Cryptocurrency gains are treated as miscellaneous income and are subject to high tax rates. | Kryptos.io helps Japanese users by offering a detailed tracking system and calculating taxes on miscellaneous income, efficiently managing high tax obligations. |
| Scenario | Description | Kryptos Features that can be of aid |
|---|---|---|
| Multiple Exchanges and Wallets | Consolidating records from various exchanges and wallets to maintain a comprehensive overview of crypto activities. | Seamless integration with numerous exchanges and wallets, automatic import, and consolidation of records. |
| International Transactions | Managing records for cross-border transactions, including currency conversions and compliance with international tax laws. | Support for multiple currencies, efficient management of cross-border activities, accurate currency conversion for reporting. |
| Complex Transactions | Handling trades, swaps, staking, lending, and other sophisticated crypto activities. | Advanced tracking, reporting, and documentation for various transaction types. Kryptos' DeFi and NFT modules offer specialized tools for managing decentralized finance and NFT activities, ensuring precise records and comprehensive oversight. |
As Web3 evolves, managing a diverse portfolio has become complex. Kryptos simplifies this with advanced tools for real-time tracking, NFT management, and DeFi analytics. Discover how Kryptos turns challenges into strategic advantages for modern investors.
Struggling with crypto tax in Australia? Kryptos.io simplifies the process, ensuring accurate and compliant filings with the ATO. Track transactions and value assets effortlessly—make tax season stress-free.
Mastering Crypto Taxation: Navigate the Complex World of Digital Assets with Kryptos, the Ultimate Solution for Accurate, Efficient, and Future-Proof Tax Reporting.
Wondering how to save tax on your cryptocurrency? Well, there’s both good news and bad news for you.
While you can’t completely avoid paying taxes, the good news is: there are multiple ways to legally minimize crypto taxes and reduce your tax burden.
In this article, we share all the details about crypto tax that you need to know and seven simple strategies to minimize it.
As per IRS, cryptocurrency is considered a property which makes it subject to both income tax and capital gains tax. A tax of up to 37% on crypto income and short-term capital gains and between 0% to 20% tax on long-term capital gains is applicable. The final tax amount depends on various factors including how long you have held the assets, your earnings, and the type of crypto transactions you are making.
Let’s discuss both types of applicable taxes in detail.
Not all crypto transactions are taxable. Here are five scenarios when you do not need to pay taxes on your crypto:
Now that you know how crypto is taxed, let’s dive into seven effective ways to help you save tax on cryptocurrency.
The best way to avoid any capital gains taxes is to HOLD your crypto. Even if you plan to dispose of your crypto, it’s important to note that the longer you hold your assets, the less taxes you need to pay. Remember, long-term capital gains where you have held your crypto for more than 12 months are subject to only 0-20% tax as opposed to 37% tax for short-term capital gains.
If any of your crypto assets have depreciated in value, you can sell them at a loss to save taxes on your overall bill. This process is also known as tax loss harvesting and is a great way to minimize crypto taxes, especially if your capital gains are high. For instance, you have a total capital gain of 2000$. To reduce your crypto tax bill, you sell a few of your crypto assets at a loss of 2000$ and offset your capital gains while calculating taxes.
Taking out loans with your stocks as collateral is a great way to cash out your profits without paying taxes. The good news is, the same strategy can be applied to your crypto assets. Since crypto is considered a form of property as per the IRS, you can use them to borrow money without triggering any taxation. Consider the loan interest rate and your personal income to make the best decision.
You can gift crypto to your family and friends for up to 15000$ to avoid applicable taxes. If the gift value exceeds the mentioned amount, you simply need to submit a gift tax return form, primarily for informational purposes. This way, you not only enjoy your crypto assets tax-free but the recipients also do not have to pay any taxes until they sell it for a profit.
This is one of the ways to dispose of your crypto without being taxed. This is also a great way to contribute to a positive cause while receiving tax benefits. If you have held your cryptocurrency for more than a year, the fair market value at the time of donation can be deducted from your tax return.
You are now already aware that long-term capital gains are subject to 0-20% taxes. But did you know the tax rate for crypto sold after a year is 0% for investors who earn less than $41,676 including crypto income? This idea can be used strategically to avoid your capital gains tax completely. Consider cashing out your profits during years when your income bracket is lower than the above-mentioned threshold to save on your tax bill.
Calculating taxes on all your crypto transactions manually can be tedious. It’s difficult to keep track of the US dollar exchange rate at every point of the year and figure out how it relates to your transactions. This may lead to calculation errors or make you lose money as you may overlook tax-saving opportunities such as leveraging HIFO accounting, or tax-loss harvesting when applicable. The best way to ensure you calculate your crypto taxes the right way and reduce taxes on cryptocurrency is to use automated crypto tax software like Kryptos. You do not need to spend hours tracking all your transactions – simply auto-sync all your wallets and exchanges to generate free tax reports in seconds. All these reports comply with your local laws and utilize tax-saving strategies to give you the best result, stress-free.
All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!
As Web3 evolves, managing a diverse portfolio has become complex. Kryptos simplifies this with advanced tools for real-time tracking, NFT management, and DeFi analytics. Discover how Kryptos turns challenges into strategic advantages for modern investors.
Struggling with crypto tax in Australia? Kryptos.io simplifies the process, ensuring accurate and compliant filings with the ATO. Track transactions and value assets effortlessly—make tax season stress-free.
Mastering Crypto Taxation: Navigate the Complex World of Digital Assets with Kryptos, the Ultimate Solution for Accurate, Efficient, and Future-Proof Tax Reporting.
