Now that we've covered how crypto taxes work. The big question is, how can I minimize my crypto taxes?
Here's a few ways:
1) Hold crypto long term. Since crypto is a capital asset it is subject to long and short term capital gains tax rates. If you hold your crypto for under a year you are subject to ordinary income tax rates which can be as high as 40% depending on your income. If you hold long term, you get more favorable tax rates with a max of 20%. Big difference!
2) Open a Self Directed IRA. There are brokerages that offer these special IRA's that allow you to invest in crypto. The advantage? These IRA's can give you tax deductions in the year you make contributions or allow you to avoid ever paying tax on your gains.
3) Use losses to your advantage. You can offset your gains with your losses. If you made $5,000 from Bitcoin and lost $5,000 from Dogecoin. You wouldn't owe any tax on your Bitcoin.
Hope this helps. If you have questions or would like help with your taxes this year, feel free to reach out to our team!