Doing taxes can seem like a hassle or even unnecessary when all you’ve made are losses, but they’re important not only to dodge penalties but also to actually reduce your tax bill if you’ve made losses. As a crypto investor in the US, you’ll have to pay taxes on any gains made during the financial year. However, you can be strategic about how you declare them and how you leverage any losses.
This year has seen many crypto investors in the USA losing significant amounts of their portfolios. From the Terra LUNA and UST collapse, the FTX fallout, or from Celsius, Voyager, or BlockFi’s collapses – there have been plenty of ways 2022 may have led to losses for your crypto investments.
Getting your taxes done can be stressful, even before adding crypto into the mix. Crypto tax calculator Koinly shares the Top 5 things crypto investors in the US can do to save tax in 2023.
Things Crypto Investors in the Us Can Do to Save Tax in 2023:
1. Keep detailed records.
In order to save tax in 2023, it’s important to maintain thorough records of all your cryptocurrency transactions. This should include information such as the date, amount, and type of cryptocurrency involved.
By keeping accurate records, you will be able to report your crypto transactions to the IRS easily. This can be beneficial in terms of potential tax deductions or credits, as it will help you to report any capital gains or losses accurately.
Koinly’s Head of Tax, Danny Talwar, adds, “It’s important to keep track of all your crypto transactions, as the IRS encourages investors to keep a record of at least the past three financial years’ worth of transactions.”
2. Take advantage of tax deductions and credits.
If you’re in the US, you can claim a number of deductions and credits that can help save tax in 2023 your tax burden.
For example, if you’ve incurred any losses on your crypto investments, you may be able to claim capital losses that can offset any gains you’ve made across other assets such as crypto, shares or real estate.
These losses can be carried forward into future financial years to offset future capital gains, up to a maximum of $3,000 per financial year. Be aware of wash sale rules – these prohibit the sale and repurchase of the same asset within 30 days of disposal.
3. Tax-free thresholds.
While you will have to pay taxes on any gains from your cryptocurrency transactions, not all of your gains will be subject to taxes. In the USA, if your income is under $40,000 in a year, you will not have to pay any Capital Gains Tax on your crypto gains.
The $40,000 Capital Gains Tax-free threshold allows individuals to earn up to $40,000 from capital gains (including profits from the sale of crypto, stocks, and real estate) without having to pay any capital gains tax.
It’s important to note that this threshold only applies to capital gains and does not affect the taxes you may have to pay on other types of income, such as wages or interest.
4. Grab an accountant.
Having an accountant can help you save tax in 2023 for a number of reasons. Accountants can help you save time and money by handling your paperwork and tax filings. Accountants can also help provide advice on how to maximize your deductions and minimize your tax liability.
Koinly’s accountant directory can help you find an accountant in minutes, with tax professionals from New York, Washington, Burbank, Houston, Fort Lauderdale, and more.
If you’re looking for an accountant ahead of the 2023 tax season, check out Koinly’s directory here.
5. Use a crypto tax calculator (like Koinly).
Using a crypto calculator can help you calculate your crypto losses and gains quickly, easily and most importantly – correctly. Tax offices around the globe recommend crypto investors use a crypto tax calculator (such as Koinly) in order to accurately track and declare any gains and losses made in the previous financial year.
Koinly’s dashboard allows you to track your crypto portfolio and any underperforming digital assets that may be sitting at a loss. Where you have already realized losses by selling, Koinly automatically shows you how these losses can be utilized to offset your capital gains and reduce your tax liability.
About Koinly
Koinly is a cryptocurrency calculator used by crypto investors in over 20 countries. Koinly integrates with 700+ exchanges, blockchains, and wallets to give investors an easy and accurate way to track their crypto transactions in one place. From here, Koinly calculates the total capital gains and income an investor has derived from their crypto in any financial year.