Cryptocurrency taxes strategy - Deferring taxes and putting them to work for you

Cryptocurrency taxes strategy - Deferring taxes and putting them to work for you

By Behiver | behiver | 20 Dec 2020


Paying taxes upon the cryptocurrency profits is a subject of high importance that evens the Bitcoin all time high reached these days. We want it or not, regardless of the country we are living in, taxes are a pain in the ass and we all need to go through this suffering and pay them. But with some good planning we can still make the best out of the due taxes and gain some time on our side while we can still put our profits to still work for us. How can we do that? By deferring the taxes for one year.

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Usually taxes are linked to the calendaristic year, so what we are selling and making a profit until 31-December we need to pay it in the first months of next year. In some countries like US that usually means that you need to pay your cryptocurrency taxes until middle of April next year. You can avoid that if you time plan your profits by selling the cryptocurrencies in the beginning of next year and thus being allowed to report them just at the end of the year (12 months) and to pay them at a time by adding around 3 months to the reported period (15 months).

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Given an example where you bought 1 Bitcoin at $10,000 at the beginning of 2019, if you were to sell it now at $24,000 that would give you $14,000 profit. We are in December, we see new ATH for Bitcoin and we might be tempted to pull the trigger and sell now. That will mean that you would need to pay taxes for $14,000 until 15 April 2021. Now, if instead of rushing in if you sell your position starting with 1st of January 2021 you will have 15 months from that moment that you need to pay your taxes thus by 15 April 2022. That is quite amazing, right?!?!

Applying this legal activity you can defer paying your taxes up to 15 months from the moment of the sale. Now, beside gaining more time to do so, there are some other positive effects and further actions that you can take in order to benefit more from this situation.

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First of all maling the trade in the new year, that might balance itself with some other bad trades that you will do that year, and thus resulting in paying less taxes as your profit decreased during the year. This is one way to plan a little bit more for the future, for the unknowns that will be in the space and cover part of the risks this way.

Second you can make some money management on the income from your sale. You can take from the profit the clean return and use them without any restriction and take the tax money and invest them further down the road. And if you succeed to double the tax money by the end of the year, you might have ensured paying the taxes from only that. Of course you need to continue and sell the cryptocurrency gained from the tax money in the next year, in order not to add them at the taxes that you need to report on 2021.

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I think this strategy is the first thing that anyone can do to improve the cryptocurrency taxes that he owns to the state. Depending on the country there might be other different incentives on how to lower the taxes percentage, but nevertheless the presented use case should put anyone in front of the things and have a legal plan on managing its crypto taxes.

Posted Using LeoFinance Beta


Behiver
Behiver

Everything on diversity. Crypto enthusiast, stocks and finance interested, blockchain games and anything related to these.


behiver
behiver

Cryptocurrency and finance topics

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