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Pay Zero Crypto Taxes
The sad reality of American life is that the government will tax anything and everything. Thus, it was only a matter of time before the Internal Revenue Service set its sights on the cryptocurrency market! Crypto taxes have been put into effect, and they are coming for your profits. What can you do about it?
Understand how crypto taxes work
First, you need to understand how the IRS is going to take your crypto profits. The IRS sees cryptocurrencies like Bitcoin and Ethereum as “property.” This means that, when you sell or trade your crypto in an exchange, that you are subject to capital gains tax.
Capital gains tax comes in the form of “losses” and “gains.” It depends on the difference from how much you bought the cryptocurrency for (the cost basis) and the amount which you sold it for (the proceeds). If you sold for more than you bought, you are subject to capital gains tax. If you sell for less than what you bought your crypto for, then you have capital loss crypto taxes.
In the end, the amount of crypto taxes you pay can reach up to 37% if you’re not careful! A tax pro can help you avoid this and other tax issues. Simply set up a free consultation.
How do you bring your crypto taxes down to $0?
It sounds fantastical, doesn’t it? The idea that you don’t have to pay your taxes on something as scrutinized as crypto is very enticing. However, for the smart taxpayer, this is a completely feasible goal.
It all depends on these three aspects of your tax filing:
- Your filing status
- Your overall income this year
- How long you hold onto your crypto
Aspect #3, “how long you hold,” is actually the most important part to paying zero crypto taxes!
The IRS separates capital gains taxes in two ways: long-term and short-term. Short-term capital gains taxes are created when you sell your crypto before you’ve held onto it for a year. These taxes are high and to be avoided at all costs. If you buy Bitcoin in January and sell it in May, then you are subject to short-term capital gains tax.
Why you should hold for a year
What you really want to do is hold onto your crypto for at least a year before you sell it. If you do this, then the IRS will use the long-term capital gains tax rate for your income bracket and filing status.
As long as your income meets its requirements, the IRS will not make you pay crypto taxes!
| Filing Status | Income | Long-Term Capital Gains Tax Rate |
|---|---|---|
| Single | $0 - $41,675 | 0% |
| Married Filing Jointly | $0 - $83,850 | 0% |
| Separately | $0 - $41,675 | 0% |
| Head of Household | $0 - $55,800 | 0% |
If you have any questions, connect with a YokeTax professional. We have tax pros with over 20 years of experience who are ready to save you money! Set up a free consultation before you miss out on more tax strategies.
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