How to not pay taxes on Bitcoin PlatoBlockchain Data Intelligence. Vertical Search. Ai.

How to not pay taxes on Bitcoin

Whether you’re in the US, UK, or most of Europe, you will have to pay taxes on the gains made from Bitcoin and other cryptocurrencies. While the blockchain technology and financial system is decentralized and independent from the government, this sadly does not mean the gains are. But, if you’re a proponent of Bitcoin becoming more credible in society, these are the compromises that we need to accept.
However, there are some ways to reduce your crypto tax in legal ways. With the help of the financial comparison site Financer.com, we have come up with some of the most effective ways to reduce your crypto tax. It’s a topic often overlooked, but given the capacity for rapid growth that some low-cap altcoins have, it’s really important to consider just how much tax you may owe.
How not to taxes on Bitcoin
One of the best ways to mitigate paying taxes on Bitcoin is to sell the currency during a year where you had low income. In 2023, many of us are self-employed or run small businesses where income fluctuates. The years where you’re more profitable, you will pay more tax. Therefore, when selling Bitcoin, you should consider which side of the tax year end to do it in, because selling during a low-income year could mean paying less tax. Or, if you had capital losses that year, it could mean paying no tax.
Holding crypto in a retirement account
If you can hold your crypto assets in a retirement or tax-advantageous wrapper, then this is the best answer to how to not pay tax on Bitcoin and alt coins. It depends on whether you’re a long-term investor of course, but if you want to minimize taxes on Bitcoin, you certainly do want to be a long-term investor.
A Roth IRA is a good example where taxes are paid on contributions, but all future withdrawals are tax-free. Crypto can sometimes be a legitimate asset help in a Roth IRA, but not always directly (contributions must be in cash). But, there are other retirement and tax wrappers around and it will depend on which jurisdiction or country you’re investing in.
Tax-loss harvesting
If you have realized capital losses on your cryptocurrency investments, you can offset those losses against capital gains you have realized from other investments. This can help to reduce your overall tax liability. For example, it’s likely that many of your alt coin investments have suffered in the past few years. These losses could be realized at the same time as when looking to sell your Bitcoin.
The beauty of tax-loss harvesting in the US and many other countries is that the ‘wash sale rule’ of having to wait 30 days (like with stocks) does not apply to crypto.
Other considerations for how to reduce crypto taxes
Again, depending on the jurisdiction, you can sometimes gift crypto. This means you have no income tax obligation on the crypto. If the gift is above $15,000, you must send off a gift tax return. Crypto can also be given as a donation and is one of the few times where disposing of it is not taxed.
Other creative methods are around too, such as taking out a crypto loan, moving to a lower-tax country, as well as simply consulting with a tax advisor.

Link: https://www.analyticsinsight.net/how-to-not-pay-taxes-on-bitcoin/

Source: https://www.analyticsinsight.net

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