What if there was Crypto credit as a way to legally avoid capital gain taxes

[yat97]

Idk if right section but my idea is since the IRS doesn't tax credit, what if there was a way to trade in "credit" instead? You know how you get cash back from credit, or even just positive credit statement balances? What if you could tap out gains in crypto in the form of credit so it doesn't get taxed?

Sorry I'm kind of a noob or maybe just not the brightest in terms of knowing legalese so someone can, please politely, explain how that would probably not work, and maybe how it could if something were changed?

It's not fair that people in the US can't trade alt coins without a cap gain tax taking literally nearly half of every single trade you do.

Obviously some buy bitcoin anonymously and ... we'll just say end up not worrying about cap gain taxes.

but it's crazy the average person who doesn't want to "bReAk tHe LaW" will get punished if they get one thing wrong on something. like imagine making thousands of trades, and those trades are not even that profitile, but the IRS wants nearly half of each trade, and you haven't even cashed out yet.

It's even more funny when about half of the millennials/gen z I know don't even know you have to pay cap gains taxes. So far none of them have ever gotten audited by the IRS or chased down or anything. I don't think they really care to go after people who aren't earning much. In fact, I have seen contradictory stuff. Like one website said you don't have to worry about cap gain taxes if you make less than a certain amount, 10k or 15k? a year or something. idk. SO maybe that's why the IRS doesn't go after them. Idk. I myself don't even know the laws.....

[Obito]

Well, it's not like they teach that in school so it's only natural that a lot of younger generation doesn't know how to pay their taxes, also tax filing services lobbied for people to not learn how to do their own taxes and to make the free services much confusing than ever so they have no choice but to use the paid services. I don't get the idea of credit though, can you expound on that OP?

[Findingnemo]

You can't avoid taxes legally, when you are saying how not to pay the taxes but you can pay less taxes if you managed to hold your assets over a year and the rate of tax depends on the state where you are living.

Younger generation who are running a business will be paying their taxes for sure because they can't evade it for too long, one their get caught they need to pay heavy amount as penalty along with their tax dues, but most people in the younger generation aren't making money from their business, they are just getting their salaries which means they get their salary only after the tax cut off.

[NotFuzzyWarm]

In the US the Capital Gains Tax applies to ALL forms of trading, not just crypto. If you hold for at least 1-year the tax rate is very low when you sell or exchange, sell in less than 1-year and yes you are hit with very high tax rate. With 1 exception those rules are the same regardless of you trading metals, stocks, FOREX, etc. The 'purchase tax' is not nice but I expect that eventually that will either go away entirely or more likely only apply to miners as a tax on rewards (which is of course income).

The one difference is that for now at least, the IRS does allow tax harvesting for crypto - eg, say you bought at a very high price and later sold at a lower price. You are allowed to record that as an immediate Capital Gains loss same as you can with the others. BUT - you are also allowed to repurchase more coin say at least 1 day later at that lower price, pay the tax for it and then hold. You CANNOT do that with other investments - they have a much longer 'cool down' time of a month or more.

[Zedpastin]

Never happen because the as notfuzzywarm says it applies to all trading but if there was a way to make a cryptocurrency that did not require trading but you still earn from capital gains some how then the government would address it and change the laws, then require you to pay capital gains. You cannot avoid tax as the saying goes death and taxes are certain in life.

[Poker Player]

You are not expressing yourself very clearly but I get the idea. There is some There is something that is already invented, that some people use and that allows you to enjoy your profits without selling, and therefore without incurring a taxable event: it's borrowing against your Bitcoin, or crypto.

This is what millionaires have long done with other types of assets, and what Saylor has now popularized with his videos. I'll leave you with two (which are not Saylot's) that explain it:

Michael Saylor's Strategy to Retire Off of Bitcoin | Tax-Free Wealth

Using Bitcoin Loans To Buy Anything

This should be done carefully, with a good debt to equity ratio and making sure you have cash flow to spare for payments.

[ModelT]

Sure sounds like the OP is describing loans backed by crypto assets as a way to be able to spend crypto profits without having to sell and be subject to capital gains...that's exactly what Blockfi and many other platforms let you do.

Forbes and others have described this https://www.forbes.com/sites/shehanchandrasekera/2021/03/17/how-are-crypto-loans-taxed/

[yhiaali3]

I think the main problem is that the United States of America and the rest of the countries do not recognize bitcoin as money but consider it as a financial asset, and this means that you have to pay tax on every transaction you make such as trading forex or metals, etc., if bitcoin is accepted as money then you will not have to pay tax on Daily transactions There will even be a tax on annual profits or annual income only.

[20kevin20]

You can't avoid taxes legally, when you are saying how not to pay the taxes but you can pay less taxes if you managed to hold your assets over a year and the rate of tax depends on the state where you are living.

You can avoid taxes legally - ask the rich how they can do so. Because I have a feeling only we, the poorer, mostly get to pay them

On a serious note, perhaps it's a good idea to get in touch with a good lawyer or so and ask them if your idea is a good one and whether it's still within the limits of the law. But a personal opinion of mine: if you find a way to avoid them, keep your lips sealed. That is because if enough people follow your way of legally avoiding the taxes, they will find a way to stop you from doing so.. 'cause they hate it

[Gozie51]

Obviously some buy bitcoin anonymously and ... we'll just say end up not worrying about cap gain taxes.

but it's crazy the average person who doesn't want to "bReAk tHe LaW" will get punished if they get one thing wrong on something.

Sorry but it looks like laws are made for the rich and against the poor. Tax evasion is suppose to have a hold against the rich who hide taxable income from the government but they are also part of the body of government and evasion becomes easy for them. The rich gets richer against the poor .

[Quickseller]

In the US Capital Gains Tax applies to ALL forms of trading, not just crypto.

It would be important to add that this includes barter transactions. So if you pay $1 for each of 10 applies, but pay in the equivalent value of pears, and exchange those apples for $20 worth of oranges, you would owe capital gains taxes on the $10 of profit you realized from the sale of the apples (plus any additional gains you realized on the sale of the pears).

You can replace the above asset classes with bitcoin and any altcoin, or fiat currency and the same concept will still apply.