Save on Future Taxes by Donating in Crypto

Uncle Sam says that in the U.S., crypto counts as property, so as a capital asset, it’s eligible for taxation. To know when and what crypto activity you’ll need to report on your tax return, you’ll need to familiarize yourself with what counts as a taxable event. 

Since the IRS categorizes it as property, crypto sales are subject to capital gains tax. The amount owed is based on the capital gain or loss of converting a digital asset into another digital asset or fiat. 

And capital gains tax is no joke. Depending on the income taxed, an individual can be on the hook for a long-term capital gain rate of 15% for digital assets held for more than a year. 

How to Minimize Your Crypto Tax Burden

First, you can use a Roth IRA to put funds into Bitcoin and Crypto ETFs or exchange-traded funds. Thus, you’re avoiding capital gains taxes by investing funds you’ve already paid taxes on. 

Let’s say your assets aren’t in the best shape. Another way to reduce your crypto tax burden is to sell your crypto, realize the losses, and repurchase the assets. As a result, you’ll lower yourself to a lower cost basis which allows you to defer taxes in the future once you’re making profits. 

Donating to a charitable organization in crypto is another decision you can make to benefit your portfolio and your choice’s cause(s). 

Benefits of Donating in Crypto

First, crypto donations aren’t subject to capital gains taxes. So if the value of your crypto assets has increased over time, donating spares you from paying the taxes on that increase. 

This is a better option than selling your crypto and donating the cash because then you would have to pay a capital gains tax on the appreciation. 

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