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 a failure to report crypto assets and transactions on tax returns could land North American investors into hot water with the IRS.
To aid in filing your crypto taxes, cryptocurrency portfolio tracking and tax platform Accointing by Glassnode offers an easy solution to instantly import and review all crypto transactions and fill your crypto taxes in just a couple of clicks. What is more, its tax loss harvesting tool helps investors minimize what they owe in taxes.
How to optimize your crypto tax return?
Most crypto assets, especially cryptocurrencies like Bitcoin, have seen significant price erosion in 2022. Some crypto investors may be tempted to reduce their tax bill by underreporting income. Such a strategy, however, would invariably lead to punitive action initiated by the IRS. To avoid that, US crypto investors need to understand all tax provisions available and utilize them to optimize their tax liability to the fullest.
For example, suppose losses from selling crypto assets exceed capital gains accrued by selling profitable positions. In that case, investors can deduct up to $3,000 against ordinary income and carry forward any remaining loss to the next accounting year. This excess can then be adjusted against any capital gains arising in the following year.
Investors could also sell digital assets that are trading at a price lower than their acquisition cost, only to buy them later within the same year. Although the IRS has excluded stocks and securities from this tax-saving tactic, crypto assets are not treated similarly. As a result, realized loss can be used to offset any capital gains tax while also allowing investors to maintain their net holdings.
How crypto tax loss harvesting reduces your tax bill
When an investor has made a net profit from all crypto transactions in a year, positions currently incurring a loss equivalent to the capital gains accrued can be sold. The loss from these positions can neutralize a portion of the capital gains, thereby reducing the overall tax sum. This method of claiming is known as tax loss harvesting. However, contrary to popular perception, tax loss harvesting isn’t the same as realizing losses and involves many calculations.
The biggest challenges are identifying which crypto assets need to be sold and also computing the extent of loss applicable to those positions. Positions sold within 365 days are subjected 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 Accointing’s universal crypto tax calculator
Many crypto tax calculator providers on the market charge a monthly fee, making these tools untenable for most retail crypto investors.
This is where Accointing’s portfolio tracking and compliance solution can benefit the 27-million-strong U.S. crypto investor base. Its comprehensive crypto tax calculator is available for free until Dec. 31, 2022 and shows you exactly how much you can save on taxes this year.
Using the tax loss harvesting tool, investors can review which crypto tokens to sell in order to offset any capital gains, making tax loss harvesting a simple activity. Additionally, it only takes five clicks to get an accurate tax report for transactions occurring within 2022, with Accointing’s crypto tax calculator capable of generating reports for portfolios containing up to 50,000 transactions in a calendar year.
With just days left before the close of 2022, Accointing’s crypto tax software can save crypto investors a lot of hassle and help them optimize their tax returns by utilizing its valuable tax loss harvesting tool. With Accointing acquired by on-chain market intelligence provider Glassnode in October 2022, its users will ultimately benefit from the combined investment intelligence insights provided by the two companies.
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