In this era cryprocurrency has been start recognising as our wealth asset hence it has become laible to pay tax from the profit we get by investing in different platform. Lately this week many countries are also adopting different law against the use of cryptocurrency by charging tax from the profit gained on trading and mining cryptocurrency. This makes people hard to collect their profolio of gain or lose for their cryto asset in order to pay the tax. There are some method to reduce those issue making investor tax friendly
Here are some tips in order to curbs those problem
Opening a Retirement Account
In country like US opening a retirement accounts is very helpful against reducing crypto tax manily for the investors. But there is a deadline for opening and contributing to the account you are holding. The main benefit of opening such account is that it came along with some incentive on paying tax and also sometime by opening this account people can forbit from paying any amount of tax from purchasing cryptocurrency. Cryptocurrency IRA can be an effective tax reducing method if you believe in the long-term value of cryptocurrencies.
Eg :crypto 401k, cryptocurrency IRA account.
Holding crypto for more than One Year
This method is mainly practising in Germany. Where people are forbit from paying any tax from investing crypto if they hold crypto for more than one year.Similar to staking where people hold their crypto for certain amount of time till it mature, by holding your cryptocurrency investment for longer than one year can divert people from paying their long term profit tax. rates. In addition to this method peoplee can also identified the coin which they have held for longer than one year and sell them. Hence it will help them reduce their overall tax payment
Choose an Opportunity Zone Fund
Opportunity zone is an place where new crypto investments are eligible for preferential tax treatment under certain condition. In this condition When an investor sells his/her crypro asset and accumulates some profit from it then they can , he or she can roll any amount of the profit into an qualified Opportunity Zone Fund within 180 days of the sale. Doing this the investor can forbit from paying profit tax until 2026. This strategy is mainly useful for bitcoin investor who have large amount of gain from investing.
Apart from opening account and choosing best opportunity fund simple and best way to save from paying gain tax is bybusing a cryptocurrency tax software. Here investore have to simple plug in theire trade history into a crypto tax software just like connecting a crypto exchange account. By doing this the software will automaticaly generate the profit and loss report in no time.Using this tools investors can analyse their gain and lose report which help them in minimising their tax to certain amount.
Here are top three crypto tax software taxbit, tokentax, beartax
Hope this tips will help all those crypto tax payers out here.