Press Release
PRICE RELEASE Many crypto investors have lost their last year’s profits and are now searching for the answers in crypto markets.
The incredible bull market crypto investors had over 2020 and 2021 may have led to you suffering from losses as opposed to gains in the coming tax season. Koinly is a cryptocurrency tax platform that shares 5 tax tips you must know about after the crypto crash.
1. Holding a property is a way to pay less tax
You want to avoid tax on crypto transactions? While you can’t dodge your tax obligations entirely – there are quite a few ways you can OptimizeYour tax situation. But here’s the catch, you’ll need to do it before the end of the financial year to pay less tax overall.
You’ve probably heard it before, but the easiest way to pay less crypto tax is to simply HODL. In most jurisdictions, any gains from holding crypto investments (or assets such as shares) longer than one-year is considered long-term capital gain. It depends on your location, any cryptocurrency sold within 12 months of purchase is:
- Germany: Tax-free
- Australia: Discounted capital gains tax of 50%
- Based on the individual’s income for the year, the US has lower taxes rates at 0%, 15% and 20% respectively
2. Gains exempt from tax
Capital gains with a tax-free threshold can allow you to owe less taxes. In the UK, individuals have a CGT allowance of up to £12,300 before paying tax. Germany has a relatively low threshold of €600, while Australians have no such allowance. If you’re in the US, the IRS states any individual’s income under $40,400 pays no Capital Gains Tax.
To help you decide your cryptocurrency disposal strategy, it is important to know the maximum tax-free capital asset in your country. Make sure to understand the taxation of crypto wherever you live.
- You can offset your gains using tax-loss harvesting
You can claim tax-loss harvesting by recognising your capital losses and then selling them at a capital gain. Capital losses can be used to offset future capital gains or over several financial years.
For example, if you made $10,000 after buying and selling Bitcoin but lost $10,000 after selling your Ether, you won’t owe any tax since you broke even. This also works if you’ve had a good year in share trading, you can offset those gains with crypto losses.
However, if you have an unrealized loss and do not crystallize it by selling before the end of the current financial year, you won’t be able to take advantage of this capital loss until next year’s tax return.
Wash sales rules prohibit you from selling assets at loss in order to make an artificial loss for the financial year. Then, immediately purchase them again. You can either swap one crypto currency for another, or buy and sell a different cryptocurrency. For example: Sell ETH for USDC then purchase BTC.
- Keep track of your crypto and spot possible opportunities
ATO, HMRC, IRS and HMRC all require investors to keep records that go back at least 3 years. This is easier with shares than it is for crypto. However, there are dozens and hundreds of cryptocurrency wallets as well as multiple DeFi protocols, NFT platforms, and exchanges that can make things difficult when it comes to tax.
Use crypto tax software KoinlyNot only will it reduce the time required to file crypto taxes, but you can track the unrealised gains as well as losses of each asset over the course of the year.
5. Choose the most cost-effective method
When calculating your crypto taxes – the cost basis method you use matters. It dictates which of your assets you’ve sold and how much your subsequent capital gain or loss is.
If you have a long-term discount for CGT in your country, FIFO tends not to provide the best gains. It may however lower your tax bill. Last in, first out (LIFO), on the other hand, can produce the best gains, but could increase your tax bill if you have to pay short-term CGT.
Koinly supports both of the above cost basis methods (and more) – so check out your settings to see which accounting method could produce the lowest tax liability. Talking to an accountant about your crypto taxes can be helpful for you to navigate any confusion and ensure you’re doing the right thing while still optimizing your taxes.
Koinly Koinly will calculate your crypto taxes automaticallyInvestors and traders of all levels. Whether it’s Crypto, DeFi or NFTs, the platform helps you save valuable time by reconciling your holdings to generate a compliant tax report in under 20 minutes. Sign upSee how much you owe today!
This press release is for informational purposes only. The promoted company and any affiliates are to be vetted by readers before they take any action. Bitcoin.com does not assume any responsibility for damages or losses resulting from or related to the content, goods, or services in this press release.
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