Crypto Tax 2023: 5 Easy Steps To Reduce Taxes on Cryptocurrencies

How to reduce taxes on cryptocurrencies?

This is probably one of the most researched queries related to digital assets and taxes on them. In all honesty, there is no legal way to avoid cryptocurrency taxes, but there are five of the best strategies like tax-loss harvesting that can help investors reduce their tax liability.

5 Easy Steps to Reduce Taxes on Cryptocurrencies

Cryptocurrency is considered “property” as the IRS treats it as a capital asset. Hence, crypto tax is no different than other taxes that are applicable on the sale or exchange of a capital asset. Here are the 7 easy steps to reduce taxes on cryptocurrencies.

Harvest your losses

Tax-loss harvesting is one of the best ways to reduce taxes on cryptocurrencies. If some of your crypto assets have decreased in value, you sell an investment that’s underperforming and losing money. This way, you use that loss to reduce your taxable capital gains by intentionally selling your cryptocurrency at a loss to claim tax savings.

Hold onto your crypto for the long term

Long-term crypto investments are considered far better than short-term. With a long-term capital gain (holding your assets for at least 12 months) you can save more on taxes. As per experts, the long-term crypto gain might help you lower your crypto taxation by 10%.

Indirect exposure to crypto

Receiving indirect exposure to cryptocurrency is one of the most effective steps to reduce your crypto taxation. Some newly launched portfolios allow Indian crypto investors to obtain exposure to a particular coin or token without directly investing in it.

Sell during a low-income year

Selling your cryptocurrencies in a low-income year helps you save on crypto taxes, as a lower income will ensure a lesser income tax rate for that financial year. Another advantage to it is that the tax rate for the crypto assets will be calculated as per the long-term capital gain rates.

Cryptocurrencies as gifts

Cryptocurrencies as gifts have no income tax obligation. This might seem like a risky bet. But if you gift a digital asset to your loved ones, it becomes possible to accomplish this goal. It is one of the best to reduce taxes on cryptocurrencies.

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Disclaimer: The information provided in this article is solely the author’s opinion and not investment advice. The whole purpose of “Crypto Tax 2023: 5 Easy Steps to Reduce Taxes on Cryptocurrencies” is to educate and provide information about what is trending in the crypto space. Anyone planning to invest in crypto assets should seek his or her own independent financial or professional advice.