How to lower your crypto tax bill before the end of the year

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While 2022 has been a year to forget for most crypto investors, the daunting task of filing crypto tax returns before the end of December remains. Many investors worry about unrealized losses on their crypto portfolio, while failure to report crypto assets and transactions on tax returns could land North American investors in hot water with the IRS .

To make filing your crypto taxes easier, the Accointing by Glassnode cryptocurrency portfolio tracker and tax platform offers a simple solution to instantly import and review all crypto transactions and file your crypto taxes with just a few clicks. Additionally, its tax loss collection tool helps investors minimize what they owe in taxes.

How to optimize your crypto tax return?

Most crypto-assets, especially cryptocurrencies like Bitcoin, saw significant price erosion in 2022. Some crypto investors might be tempted to lower their tax bill by underreporting their income. Such a strategy, however, would invariably lead to punitive action initiated by the IRS. To avoid this, US crypto investors should understand all available tax provisions and use them to maximize their tax liability.

For example, suppose the losses from selling crypto assets exceed the capital gains accrued from selling profitable positions. In this case, investors can deduct up to $3,000 from ordinary income and carry forward any remaining loss to the next accounting year. This surplus can then be adjusted according to the capital gains realized the following year.

Investors could also sell digital assets that are trading below their cost of acquisition, to buy them later in the same year. Although the IRS has excluded stocks and securities from this tax-saving tactic, crypto assets are not treated the same. Therefore, the realized loss can be used to offset any capital gains tax while allowing investors to retain their net worth.

How Collecting Crypto Tax Losses Reduces Your Tax Bill

When an investor has made a net profit on all crypto trades in a year, positions currently experiencing a loss equivalent to accrued capital gains can be sold. The loss of these positions may offset some of the capital gains, thereby reducing the overall amount of tax. This method of claiming is known as tax loss harvesting. However, contrary to popular perception, harvesting tax losses is not the same as realizing losses and involves a lot of calculations.

The biggest challenges are identifying which crypto assets to sell and calculating the extent of losses applicable to those positions. Positions sold within 365 days are subject to short-term capital gains tax rates, while those held for more than a year are treated as long-term capital gains.

Say Hello to Accointings Universal Crypto Tax Calculator

Many crypto tax calculator providers in the market charge monthly fees, which makes these tools untenable for most retail crypto investors.

This is where Accointings’ portfolio tracking and compliance solution can benefit the base of 27 million U.S. crypto investors. Its comprehensive crypto tax calculator is available for free until December 31, 2022 and shows you exactly how much you can save on taxes this year.

Using the tax loss collection tool, investors can review crypto tokens for sale to offset capital gains, making tax loss collection a simple activity. Plus, it only takes five clicks to get an accurate tax report for transactions made in 2022, with Accointings Crypto Tax Calculator able to generate reports for portfolios containing up to 50,000 transactions in a calendar year. .

With 2022 just days away, Matchings’ crypto tax software can save crypto investors a lot of hassle and help them optimize their tax returns using its valuable tax loss collection tool. With the acquisition of Matching by on-chain market intelligence provider Glassnode in October 2022, its users will eventually benefit from the combined investment insights provided by the two companies.

Disclaimer. Cointelegraph does not endorse any content or product on this page. Although we aim to provide you with all important information we may obtain, readers should do their own research before taking any action related to the company and take full responsibility for their decisions, and this article cannot no longer be considered as investment advice.

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