- As tax season approaches, crypto holders should consider their liabilities for the year.
- Several strategies can be employed to limit or defer capital gains and losses.
- Staying organized and using services such as TaxBit is a recommended first step towards effectively reducing your crypto tax bill.
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A new year means preparing to pay taxes, which affects every single crypto enthusiast. But getting it right and keeping the IRS off your back is no easy task.
Crypto taxes can encompass capital gains tax and income tax. The fee differs depending on the user’s activity (roughly, capital gains tax applies to trading and investing, whereas income tax is charged for mining and staking).
Though complex, it’s more important than ever to ensure you’re declaring every transaction. Official regulators worldwide have made cryptocurrencies, and following their digital paper trail, a top priority in 2020. They’ll be watching much more closely than they have been in years.
Still, you can use some legal tactics to limit the costs, and they vary according to the state of the market. Where downward cycles are more about limiting losses, bull markets require a much different approach.
As crypto enters a new year and market cycle, Crypto Briefing outlines some of our biggest tips for minimizing your crypto tax bill.
Track Crypto Trades Diligently
It might feel cumbersome, but it’s crucial to track every single crypto trade.
It’s impossible to make any savings if you don’t have an accurate record of your activity, so staying organized will likely be a huge benefit in the long run.
Play Long-Term Games
Capital gains tax falls under two categories in the U.S., short-term and long-term.
Short-term capital gains apply to assets held for less than one year, and any profits are charged…