Most crypto users and traders are looking for ways and methods in order to minimize taxes on cryptocurrency transactions. Bitcoin is regulated as property in the U.S. As a result you have to pay taxes every time you sell, trade or exchange Bitcoin or other cryptos to USD or other cryptocurrencies. In this article we are going to talk about how to reduce and eliminate your crypto tax rate.
Use 0% Long-term Capital Gain Tax Rate
The U.S tax code has a less known 0% tax rate for long-term capital gains. In order to be eligible for this regulation, some criteria are important. Those criteria consist of your annual income, filling status and how long you kept the cryptocurrency. For instance, if you are married, you could make $80000 in crypto profit without paying any taxes.
How to reduce and eliminate your crypto tax rate; Donate Crypto Assets to Charities
If you donate your long term crypto assets, then you are qualified to get a tax deduction. For example, when you hold your crypto asset for over 12 months in a charity, your tax deduction will be equivalent to the fair market value of the asset at the time of donation. Meanwhile, you don’t have to pay any taxes on the capital gains of the donated asset.
Crypto donation is subjecting to a complex set of tax rules. It’s recommended to consult with a qualified CPA before you take action. The CPA can guide you in order to maximize your deduction.
Trade Crypto In A Self-Directed IRA (SDIRA)
Self-Directed IRA (SDIRA) could be a great tool to invest in crypto. By using it, you would be able to defer taxes until retirement. It’s notable that by using this method you can avoid paying taxes completely. You just postponed it to your retirement. In fact, you can accumulate your profits in your portfolio without having paying taxes today. This powerful tool can increase your overall return significantly in long term. In addition, when you take out the funds at your retirement time, you will be subjected to a lower tax rate. Consequently, you can pay less tax and save some amount of money.