Crypto Tax Question

[eminan]

So I've officially been in the crypto game since the beginning of this year. I've been making buys from P2P and exchanges and sold a few coins here and there mostly for small losses for investing in other altcoins.

Since the so called "experts" are saying this bull might end towards the end of the year, I'm planning to sell off (DCA) at least half of my portfolio towards the end of the run.

Since you have to hold your crypto at least a year for it to be tax exempt I'm really concerned about all the capital gains taxes I'll have to pay since I'll most likely be making most of my sells before the year ends.

Are there any crypto tax resources or advice people on here would recommend? I'm an American citizen in California, looking at some sites like CryptoTrader.tax.

But my main concern is how to lessen the capital gains hit I'm going to take if I sell within a year, it seems like there's no way around this if I don't hold my crypto for a year. Any thoughts?

[Beparanf]

It depends on what you country you reside. There are different guidelines in terms of application of tax in every country so you might receive a different opinion out here that not suitable on your case.

FYI. Bull run is not guaranteed that it will end until end of the year. It might happened early or late so don’t consider on your DCA. Just consider your profit and your tax computation.

[Charles-Tim]

Since you have to hold your crypto at least a year for it to be tax exempt I'm really concerned about all the capital gains taxes I'll have to pay since I'll most likely be making most of my sells before the year ends.

Crypto taxes may differ from country to country, but I believe this should help.
There are two types of crypto taxes:

1. The short term capital gain
2. The long term capital gain

In 2020 the capital gains tax rates are either 0%, 15% or 20% for most assets held for more than a year. Capital gains tax rates on most assets held for less than a year correspond to ordinary income tax brackets (10%, 12%, 22%, 24%, 32%, 35% or 37%).

What is short-term capital gains tax?
Short-term capital gains tax is a tax on profits from the sale of an asset held for one year or less. The short-term capital gains tax rate equals your ordinary income tax rate — your tax bracket. (Not sure what tax bracket you’re in? Review this rundown on federal tax brackets.)

federal tax brackets
https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets/

What is long-term capital gains tax?
Long-term capital gains tax is a tax on profits from the sale of an asset held for more than a year. The long-term capital gains tax rate is 0%, 15% or 20% depending on your taxable income and filing status. They are generally lower than short-term capital gains tax rates.

Are there any crypto tax resources or advice people on here would recommend? I'm looking at some sites like CryptoTrader.tax.

The best is to learn more about how crypto assets are taxed, you can read the PDF for better way to understand about it, it will help you to do the maths to know exactly what you should pay base on US standard.

https://www.irs.gov/pub/irs-pdf/i1040sd.pdf

2020 Capital Gains Tax Calculator
https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates

[o_e_l_e_o]

But my main concern is how to lessen the capital gains hit I'm going to take if I sell within a year, it seems like there's no way around this if I don't hold my crypto for a year.

Since you say you have already made a number of trades in which you made a loss, you can use these losses (provided you have good records them) to offset some of your capital gains. If you have made capital losses elsewhere, such as the stock market, then again you can use these to offset your gains.

If you are married, then depending on both your income and your spouse's income, then it may make sense to file jointly with them, or to gift them some of your assets and file separately.

You can read more here: https://www.irs.gov/taxtopics/tc409. You would do well to take professional advice if you are talking about significant sums of money here.

[aoluain]

I'm not a U.S citizen so I dont concern myself with the tax laws there. I hope this resource
from coinbase helps as well as Charles-tim's links above.

2020 tax guide: crypto and Bitcoin in the U.S.

Did you buy, sell, use, or trade crypto? If so, you may owe taxes if you’re a US taxpayer.

Topics covered:

1.1 Do I have to pay crypto taxes?

2.1 Determine if you owe crypto taxes

2.2 Calculate gains and losses

2.3 consult a tax professional

2.4 Prepare your forms

2.5 File your taxes

[hd49728]

Tax policies are different by nations and governments. Here is the topic [Tutorial] Crypto taxes for beginners. It can be used as a reference and you have to search for the guide in your nation.

You can have tax deduction if you file a report for each year that you have to take care of a disability in your family.

[libert19]

It depends on what you country you reside.

He literally said in post, he's American citizen in California.

FYI. Bull run is not guaranteed that it will end until end of the year. It might happened early or late so don’t consider on your DCA. Just consider your profit and your tax computation.

Yeah right, that's why dca is best strategy.

[odolvlobo]

Also, you must consider that the 1-year term begins when you obtain each lot. For example, if you bought 1 BTC in January, 1 BTC in February, and 1 BTC in March, then you must wait until January to sell the 1st BTC, and February to sell the 2nd BTC, and March to sell the 3rd BTC.

[PrimeNumber7]

Since you have to hold your crypto at least a year for it to be tax exempt

<>
I'm an American citizen in California<>

This is not true.

If you hold an asset for more than a year, any capital gains will generally be subject to long-term capital gains taxes, which are generally less than short term (<1 year held) capital gains taxes (generally are taxed similarly to ordinary income).

In general, you can use any capital gains losses to offset capital gains if you sell both in the same year.

I would suggest that you consult with a tax professional who is familiar with your individual tax situation who can give you personalized tax advice, rather than generalized tax information as you will find in this thread.

[mersal]

The only way to reduce the capital gain tax is by holding your crypto assets more than a year, by that you can reduce great amount of tax rate. But if you are smart, you just cash out the capital money and keep holding the gains so you no need to pay any taxes unless you cash it out completely.

IIRC, you also can claim deduction in the tax of your capital gains from your capital loss of previous year if you made any and I guess it is upto $3000 but surely you need someone who is in that profession to give better knowledge about tax paying.