Wednesday, 22 March 2023

Crypto News

Tax strategies allow crypto investors to offset losses

Tax strategies allow crypto investors to offset losses

2022 was tough for the crypto market. A recent report published by security services platform Immunefi found that the crypto industry lost a total of $3.9 billion in 2022. 

Detrimental losses such as these are often concerning for crypto investors, yet there may be a silver lining behind decreasing assets for investors reporting crypto on their taxes.

Lisa Greene-Lewis, a certified public accountant at TurboTax, told Cointelegraph that while crypto investors made huge gains in 2021, this changed drastically in 2022. “We have seen a crypto winter occur, and TurboTax wants to help investors cope with their losses,” she said. According to Greene-Lewis, tax-loss harvesting is the most important notion to keep in mind when it comes to saving money when filing taxes. She said:

“With crypto, you can offset gains with losses. Any leftover losses can be offset up to $3,000 against ordinary income like wages. Losses exceeding $3,000 can be carried forward to the next tax year.”

Greene-Lewis explained that as new, young investors enter the crypto market, awareness around tax-loss harvesting is becoming more critical. According to a Pew Research Center survey cited in TurboTax’s latest tax trend report, 16% of Americans have invested in, traded or used cryptocurrency. Individuals between the ages of 25 and 34 are more likely to have cryptocurrency sales transactions than any other age group. “Many of these individuals are unaware of tax-loss harvesting,” Greene-Lewis said.

Percentage of tax filers with cryptocurrency transactions. Source: TurboTax

While the last day for tax-loss selling for 2022 passed on Dec. 30, Greene-Lewis reiterated that crypto investors can still perform this action since those losses roll forward. 

Steven Lubka, vice president of Swan Global Wealth — Swan Bitcoin’s private client services arm — further told Cointelegraph that tax-loss harvesting is a great option for Bitcoin (BTC) investors.

“This is probably the most actionable tax strategy. Swan Global Wealth works with private clients to provide valuable market insights, yet most individuals did not know that tax-loss harvesting was an option,” he said.

Recent: What crypto hodlers should keep in mind as tax season approaches

Lubka further pointed out that tax-loss harvesting is beneficial because there is currently no “wash sale rule” applied to crypto, which would prevent the tax break if an investor bought that same asset 30 calendar days before or after the…

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