Curt Mastio
By Curt Mastio on November 22, 2023

Minimizing Your Crypto Taxes

It’s hard to believe that another tax season is already upon us. Despite cryptocurrency having a high potential to generate wealth for its investors, it’s essential that you have an understanding of the taxation rules and regulations. By having a better understanding of these tax implications and with the help of a crypto tax CPA, you can help minimize your tax burden and your stress this tax season. 

Why Work with a Crypto Tax CPA?

Taxes on regular assets can be confusing enough, and when you add the complexities of cryptocurrency, you can quickly feel overwhelmed. With so many nuances that surround various cryptocurrency activities, it’s highly beneficial to work with a CPA who understands the ins and outs of your liabilities. Working with a crypto tax CPA can help you identify opportunities to be strategic and use your transactions to your financial advantage. 

Government and other agencies have a heightened awareness of cryptocurrencies which has resulted in the close tracking of customer activity. But despite this focus, there are still many details that remain opaque. 

Cryptocurrency Tax Minimization Strategies

If you’re still not convinced of the importance of working with a professional, we’ve outlined some different methods that your CPA might advise you on. 

Offset Gains with Losses

Offsetting your gains with losses means that if you can make a profit on one cryptocurrency, you can use those to offset potential losses from other cryptocurrencies within the same year. This can help lower your overall taxable income by either reducing or eliminating your capital gains. This also benefits you as you have lower tax rates for long-term holdings as your profits are treated as long-term capital gains. These are taxed at a much lower rate when compared with short-term capital gains. 

Sell Assets During a Low-Income Year

Another strategy that your crypto tax CPA might advise you on is your income level and how it impacts your tax rate. For example, if you have capital gains from a cryptocurrency sale, the amount of your taxable income rate will directly impact your tax rate. If you know that you’ll have a lower-income year, it could be beneficial to sell your cryptocurrency that you believe will generate gains, meaning you’ll pay a lower tax rate on said gains. 

Longer-Term Holdings

If you’re able, holding onto your cryptocurrency assets for the long-term can help reduce your tax implications while simultaneously maximizing your returns. If you hold onto your investments for over a year, you’ll qualify for a long-term capital gains tax. This is a significantly lower rate compared with the standard income tax rate that applies when you sell your assets quickly. To minimize your taxes on your digital assets, strive to hold onto them for as long as you’re able. 

Guidance From Our Experts

It’s not too late to seek our advice and guidance this tax season! At Founder’s CPA, we are proud to work with individuals and companies with their crypto tax needs. If you’re interested in learning more about our credentials and how we can assist you, please contact us for a free initial consultation.

Published by Curt Mastio November 22, 2023
Curt Mastio