Can you believe that tax season is upon us once again? Whether you’re exploring crypto taxes software for assistance with your taxes or you prefer to use an experienced CPA to guide you, it’s important that you do everything possible to leverage market downturns to your advantage. This is where tax-loss harvesting comes into play. 

Many people involved in cryptocurrency assume that there are no ways to minimize taxes or that claiming losses isn’t worth the work. In reality, this isn’t the case.

What Is Tax-Loss Harvesting?

Let’s start with a basic definition of tax-loss harvesting. This occurs when a cryptocurrency investor sells an investment that they purchased at a higher price that current fair market value. This helps offset existing or potential future gains they receive from other investments. This means that you’re only paying taxes on the net amount of gains or losses from the positions sold, helping to lower or even eliminate your taxable gain for the year.

Of course, the main benefit to tax-loss harvesting is a tax reduction. As a recap, those who earn less than $40,000 as single-filers or $80,000 as joint filers will pay a 0% long-term capital gains tax. Those in the top tax bracket pay a 20% long-term capital gains tax while some investors might be subject to an additional 3.8% tax on their net investment income tax. 

What Assets Qualify for Tax-Loss Harvesting?

In terms of what cryptocurrency investments qualify for tax-loss harvesting, it applies to any tradable cryptocurrency because all cryptocurrency is treated as property.

You may be thinking, but what about wash sale rules? This rule prohibits investors from selling an investment that they made for a loss and replacing it with the same or a “substantially identical” investment within 30 days before or after the sale. This is technically a 61-day window and the rule also applies to assets such as stocks, bonds, mutual funds, ETFs, options, etc. However, this rule does not apply to assets classified as property, such as cryptocurrencies. 

How Crypto Taxes Software Can Help

By leveraging a crypto taxes software or the guidance of a cryptocurrency tax expert, you can help identify tax-loss harvesting opportunities that you might not have otherwise noticed. Software can help automatically use your crypto transaction history to track and report on opportunities, automatically tracking how much of each coin you hold to ultimately lower your total tax liability. 

Talk to Our Team at Founder’s CPA

Now is the time to reach out to our team at Founder’s CPA to get started! If you’re interested in learning more about crypto taxes software or how we can help lower your liability, please reach out to our team today!

Curt Mastio
Post by Curt Mastio
Nov 22, 2023 2:54:20 PM
Curt Mastio started Founder’s CPA in 2017 and currently serves as the Managing Partner of the firm. After obtaining both his Bachelor’s and Master’s degrees in accounting from the University of Illinois in Urbana-Champaign Curt started his career in Big Four public accounting. Shortly thereafter Curt served as the Chief Financial Officer of Storage Squad began his stint as an Adjunct Instructor at Northwestern University’s Farley Center for Entrepreneurship and has been teaching Accounting & Finance to undergraduate students for 6+ years. In his current role Curt oversees strategy, operations, and business development at Founder’s CPA. Further, Curt has experience working directly with 200+ startups and small businesses providing accounting, tax, and outsourced CFO services. His industry expertise lies in the SaaS, Blockchain, Marketplace, and Fintech industries. He has served as a key advisor working directly with startups that range from pre-revenue to companies generating over $30 million dollars a year in revenue. Lastly, he serves a key role working directly with the firm’s clients that have collectively raised over $200 million in venture capital funding to date. Curt is also an active advisor, mentor, and investor in the startup ecosystem. He has facilitated numerous workshops, webinars, and presentations to incubators and other startup-centric organizations. He is also an active mentor for Techstars in both Chicago and Iowa. Outside of his daily professional duties Curt is actively involved with Beat the Streets Chicago and was a founding member of its Young Professionals Board. His efforts in both leadership and community involvement were recognized when he was awarded the Illinois CPA Society’s Outstanding Young Professional Leadership Award in 2020. He was also a panelist at their annual conference in 2022 where he spoke about his experiences starting and operating a public accounting firm. He maintains an active Certified Public Accountant designation that he obtained in 2014. Outside of work, Curt can be found spending time with his friends & family including his dog Rufus. His hobbies include golf, boating, cooking, reading, and attending sporting events & concerts.