3 intelligent crypto tax strategies to contemplate – regardless of market direction

The world of cryptocurrency is constantly changing, influenced by political and economic uncertainty. As investors navigate through these turbulent times, it’s essential to be prepared and make smart decisions when it comes to taxes.

At Extreme Investor Network, we understand the challenges that come with investing in cryptocurrency. That’s why we’ve compiled a list of key tax strategies to consider, even in the midst of uncertain market conditions. Let’s delve into some valuable insights to help you make informed decisions.

  1. Weigh ‘tax-gain harvesting’
    Despite recent fluctuations in cryptocurrency prices, many investors may have substantial gains in their portfolios. If you anticipate a lower-income year ahead, you could leverage tax-gain harvesting to strategically sell profitable crypto assets while in the 0% long-term capital gains bracket.
Related:  McDonald's implements strategies to boost mobile sales

Andrew Gordon, a tax attorney and certified public accountant, emphasizes the importance of spreading earnings across multiple years through tax-gain harvesting. However, it’s crucial to assess the tax implications of increasing your adjusted gross income, as it could impact other tax benefits.

  1. Reset your purchase price
    Harvesting gains and reinvesting could provide an opportunity to reset your asset’s original purchase price, known as the basis, to minimize future tax obligations. Even if you fall within the 15% long-term capital gains bracket, adjusting your basis could be beneficial if you anticipate higher income in the future.

Adam Markowitz, an enrolled agent, suggests that some investors might also face an additional 3.8% levy if their modified adjusted gross income exceeds certain thresholds. By strategically resetting your purchase price, you can align your investment strategy with your financial goals.

  1. Consider the crypto wash sale ‘loophole’
    For those holding crypto assets with losses, tax-loss harvesting can help offset other investment profits and reduce taxable income by up to $3,000 annually. It’s advisable to harvest crypto losses gradually throughout the year, as waiting until year-end may diminish the effectiveness of this strategy.
Related:  Market Trends on June 5, 2024

Unlike traditional assets, the wash sale rule currently does not apply to cryptocurrency. This means investors can harvest losses and repurchase immediately without triggering any restrictions. While Congress has yet to repeal the crypto wash sale rule, changes may be on the horizon as lawmakers navigate tax policy reforms.

At Extreme Investor Network, we recognize the importance of staying ahead of the curve when it comes to taxes and investments. By understanding these key strategies and incorporating them into your financial plan, you can optimize your cryptocurrency portfolio and minimize tax liabilities.

Stay tuned for more exclusive insights and expert tips on personal finance and investment strategies from Extreme Investor Network. Subscribe to our newsletter for the latest updates and resources to help you make informed decisions in today’s dynamic financial landscape.

Related:  Avoiding Knee-Jerk Reactions to Candidates' Proposed Tax Increases: Why it's Important

Source link