How to reduce your crypto tax bill before year-end

Whereas 2022 has been a 12 months to neglect for many crypto buyers, the daunting job of submitting crypto tax returns earlier than the top of December stays. Many buyers fear about unrealized losses on their crypto portfolio, whereas a failure to report crypto belongings and transactions on tax returns might land North American buyers into scorching water with the IRS.

To assist in submitting your crypto taxes, cryptocurrency portfolio monitoring and tax platform Accointing by Glassnode gives a simple resolution to immediately import and assessment all crypto transactions and fill your crypto taxes in simply a few clicks. What’s extra, its tax loss harvesting instrument helps buyers reduce what they owe in taxes.

optimize your crypto tax return?

Most crypto belongings, particularly cryptocurrencies like Bitcoin, have seen important worth erosion in 2022. Some crypto buyers could also be tempted to scale back their tax invoice by underreporting earnings. Such a method, nevertheless, would invariably result in punitive motion initiated by the IRS. To keep away from that, US crypto buyers want to know all tax provisions accessible and make the most of them to optimize their tax legal responsibility to the fullest.

For instance, suppose losses from promoting crypto belongings exceed capital positive factors accrued by promoting worthwhile positions. In that case, buyers can deduct as much as $3,000 in opposition to atypical earnings and carry ahead any remaining loss to the following accounting 12 months. This extra can then be adjusted in opposition to any capital positive factors arising within the following 12 months.

Buyers might additionally promote digital belongings which might be buying and selling at a worth decrease than their acquisition price, solely to purchase them later throughout the similar 12 months. Though the IRS has excluded shares and securities from this tax-saving tactic, crypto belongings are usually not handled equally. Because of this, realized loss can be utilized to offset any capital positive factors tax whereas additionally permitting buyers to keep up their web holdings.

How crypto tax loss harvesting reduces your tax invoice

When an investor has made a web revenue from all crypto transactions in a 12 months, positions at the moment incurring a loss equal to the capital positive factors accrued could be bought. The loss from these positions can neutralize a portion of the capital positive factors, thereby decreasing the general tax sum. This methodology of claiming is named tax loss harvesting. Nonetheless, opposite to well-liked notion, tax loss harvesting isn’t the identical as realizing losses and entails many calculations.

The largest challenges are figuring out which crypto belongings should be bought and likewise computing the extent of loss relevant to these positions. Positions bought inside one year are subjected to short-term capital positive factors tax charges, whereas these held for greater than a 12 months are handled as long-term capital positive factors.

Say “Good day” to Accointing’s common crypto tax calculator

Many crypto tax calculator suppliers in the marketplace cost a month-to-month charge, making these instruments untenable for many retail crypto buyers.

That is the place Accointing’s portfolio monitoring and compliance resolution can profit the 27-million-strong U.S. crypto investor base. Its complete crypto tax calculator is accessible without cost till Dec. 31, 2022 and reveals you precisely how a lot it can save you on taxes this 12 months.

Utilizing the tax loss harvesting instrument, buyers can assessment which crypto tokens to promote to be able to offset any capital positive factors, making tax loss harvesting a easy exercise. Moreover, it solely takes 5 clicks to get an correct tax report for transactions occurring inside 2022, with Accointing’s crypto tax calculator able to producing reviews for portfolios containing as much as 50,000 transactions in a calendar 12 months.

With simply days left earlier than the shut of 2022, Accointing’s crypto tax software program can save crypto buyers a variety of trouble and assist them optimize their tax returns by using its useful tax loss harvesting instrument. With Accointing acquired by on-chain market intelligence supplier Glassnode in October 2022, its customers will finally profit from the mixed funding intelligence insights supplied by the 2 firms.