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Looking for an easy way to reduce your crypto tax bill?Â
Letâs walk through some tips that can potentially help you save thousands of dollars on your tax bill! In this article, weâll run through the basics of cryptocurrency taxes and share eleven simple tax-saving strategies.Â
Quick Look: 11 Ways to Minimize Your Crypto Tax LiabilityÂ
- Harvest your lossesÂ
- Take advantage of long-term tax ratesÂ
- Take profits in a low-income yearÂ
- Give cryptocurrency giftsÂ
- Buy and sell cryptocurrency in an IRAÂ
- Hire a crypto-specialized CPAÂ
- Make a cryptocurrency donation
- Take out a cryptocurrency loanÂ
- Move to a low-tax state/countryÂ
- Keep careful records of your crypto transactionsÂ
- Leverage crypto tax softwareÂ
11 ways to minimize your crypto tax liabilityÂ
Letâs break down eleven strategies that can help reduce your crypto tax burden.Â

1. Harvest your lossesÂ
Selling your cryptocurrency at a loss comes with major tax benefits. Thatâs why many investors choose to intentionally take a loss on cryptocurrency investments, a strategy known as tax-loss harvesting.Â
When you harvest your crypto losses, you can offset any capital gains from cryptocurrency, stocks, and other assets as well as up to $3,000 of income. If your net loss exceeds this amount, you can carry forward your losses into future tax years.Â
Tax-loss harvesting has been a well-known strategy in the stocks and equities world for decades. However, cryptocurrency has a unique advantage â currently, tax professionals agree that crypto is not subject to the wash sale rule. While you cannot claim a loss on stocks and equities if you buy it back within 30 days of a sale, these same restrictions do not apply to crypto!Â

2. Invest for the long termÂ
The simplest way to minimize your tax burden is to wait 12 months or longer to dispose of your crypto. The American tax code is set up to encourage long-term investment â so the capital gains tax on your profits will be significantly lower!Â

3. Take profits in a low-income yearÂ
The lower your income during the tax year, the lower the tax rates youâll pay on your cryptocurrency disposals.Â
As a result, you should consider taking profits on your cryptocurrency in years where your annual income is low. Many investors choose to take profits in years when they are studying full-time or in between jobs.Â

4. Give cryptocurrency giftsÂ
If you give cryptocurrency away as a gift, you have no income tax obligation. While gifts with a fair market value above $16,000 require you to submit a gift tax return, this form is primarily for informational purposes.Â
Receiving a cryptocurrency gift is also not a taxable event. However, if you receive a crypto gift, you should keep records that detail the value of your gift at the time you acquired it. This can be useful for calculating gains and losses in the case of a future disposal.Â
For more information, check out our blog on how cryptocurrency gifts are taxed.Â

5. Buy and Sell Cryptocurrency Via Your IRA or 401-K
Retirement accounts are designed to help investors build wealth while minimizing their taxes. While many well-known IRA providers do not give investors the opportunity to directly invest in cryptocurrency, you can invest in cryptocurrency through a self-directed IRA.Â
Self-directed IRAs allow investors to store their retirement savings in alternative investments such as real estate, precious metals, and cryptocurrencies. If you are under the age of 50, you are allowed to contribute $6,000 a year in total to all of your IRAs, including self-directed IRAs.Â
There are several options available for self-directed IRAs that allow investors to invest in cryptocurrencies. Popular choices include iTrustCapital, Bitcoin IRA, and Coin IRA.Â

6. Hire a Crypto specialized CPA (Certified Public Accountant)
Navigating the tax code on your own can feel overwhelming. Thatâs why you may want to consider enlisting the help of a professional.Â
Though it may be an expensive step to take, many investors find that a quality accountant is well worth the money. An accountant well-versed in cryptocurrency can cover their own costs by identifying strategies to minimize your tax burden.Â
If you choose this route, you should find an accountant with deep knowledge of the cryptocurrency ecosystem. You can get started by looking at our list of verified cryptocurrency tax accountants.Â

7. Give a cryptocurrency donationÂ
Cryptocurrency donations can be a great way to contribute to meaningful causes. In addition, donating crypto is a rare circumstance where the IRS allows crypto investors to âdouble dipâ on tax benefits.Â
Donating cryptocurrency is one of the few occasions when disposing of cryptocurrency is not taxed.Â
In addition, cryptocurrency donations can be treated as a tax deduction and potentially reduce your tax bill!Â
For more information, check out our guide on how crypto donations are taxed.Â

8. Take out a cryptocurrency loanÂ
Thinking about selling your cryptocurrency? Unfortunately, these âdisposalsâ can lead to a large tax bill â especially if the price of your crypto has appreciated significantly since you originally received it! One alternative is to take out a loan using your cryptocurrency as collateral.Â
Taking out a loan is considered a non-taxable event. That means youâll be able to get access to fiat currency without having to pay a hefty tax bill.Â
For more information, check out our blog post on how cryptocurrency loans are taxed.Â

9. Move to a low-tax state/countryÂ
While it may seem like an extreme step to take, some investors do choose to relocate to different regions with more favorable tax rates.Â
Currently, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have no income taxes (though New Hampshire taxes interest and dividends).Â
Some investors go as far as to relocate to countries that donât tax cryptocurrency. Currently, countries like the United Arab Emirates and Malta donât tax capital gains for individual investors.

10. Keep careful records of your crypto transactionsÂ
Itâs important to keep careful records of your cryptocurrency transactions so that you can file your taxes accurately.Â
In cases where you canât find your original cost basis for acquiring your cryptocurrency, you may be required to recognize 100% of your proceeds as a capital gain  â which means you could be paying significantly more in taxes!Â
To avoid situations like these, your cryptocurrency records should include information such as the price of your crypto at receipt and disposal, as well as the date you acquired and disposed of your crypto. If you havenât been keeping track of your transactions, you can use crypto tax software to automate the process.

11. Leverage crypto tax software
Looking for an easy way to save time and money when filing your taxes? Cryptocurrency tax software like CoinLedger can help.Â
Thereâs no need to spend hours poring over spreadsheets of your cryptocurrency transactions. Instead, you can automatically import your transactions from exchanges like Coinbase and blockchains like Ethereum and generate a comprehensive tax report in minutes.Â
Once youâre sure your information is accurate, you can plug your crypto tax reports into filing software like TurboTax or TaxAct.
How do crypto taxes work?Â
Letâs review the basics of how cryptocurrency is taxed.Â
Capital gains: If you dispose of your cryptocurrency, your profits will be subject to capital gains tax. Disposal events include selling your cryptocurrency for fiat, trading your cryptocurrency for other cryptocurrencies, and buying goods and services with crypto.Â
Ordinary income tax: If you earn income in the form of cryptocurrency, youâll need to pay ordinary income tax. Income events include earning staking or mining rewards, earning referral bonuses from crypto apps, or receiving compensation for your work in crypto.
For more information, check out our complete guide to cryptocurrency taxes.Â
Is avoiding crypto tax legal?Â
Itâs important to draw a distinction between tax avoidance and tax evasion.Â
Tax avoidance: Taking steps to legally reduce your tax bill.Â
Tax evasion: Intentionally not reporting or misrepresenting your income.Â
While tax evasion is a serious crime with serious consequences, all of the tips outlined above are fully legal tax avoidance strategies.Â
How much tax do I pay on crypto?Â
The tax rate you pay on cryptocurrency varies depending on your holding period and whether your income is classified as income or capital gains.Â
If you earn cryptocurrency income or dispose of your cryptocurrency after less than 12 months of holding, your cryptocurrency will be taxed as ordinary income (10-37%).

If you dispose of cryptocurrency after more than 12 months of holding, your cryptocurrency will be taxed as long-term capital gains (0-20%).Â

Want to estimate your crypto tax bill? Check out our free crypto tax calculator. Â
How do I avoid crypto taxes in other countries
Want to know more about how to avoid crypto taxes in your country? Hereâs a list of guides to help you legally reduce your tax bill no matter where youâre located!Â
- Avoid Crypto Tax in AustraliaÂ
- Avoid Crypto Tax in the UKÂ
- Avoid Crypto Tax in Canada
- Avoid Crypto Tax in New ZealandÂ
- Avoid Crypto Tax in IrelandÂ
- Avoid Crypto Tax in GermanyÂ
- How to Cash Out Crypto Without Paying Taxes (USA)Â
Start managing your crypto taxes today. Â
Looking for a platform that can help you save time and money this tax season? Try CoinLedger.Â
More than 400,000 investors from all across the world use CoinLedger to generate complete crypto tax reports and find their tax-saving opportunities in minutes.
Frequently asked questions
- How can I avoid cryptocurrency taxes?
While there is no legal way to evade cryptocurrency taxes, strategies like tax-loss harvesting can help investors legally reduce their tax liability.
- Can the IRS track Bitcoin?
Yes. Transactions on the Bitcoin blockchain are publicly available, and the IRS has worked with contractors like Chainalysis to analyze the blockchain and crack down on tax fraud.
- Do you have to pay taxes on cryptocurrency if you spend it?
Yes. Spending cryptocurrency is considered a disposal event subject to capital gains tax.
- Do you pay taxes on crypto losses?
Capital losses can offset capital gains and up to $3,000 of personal income. Any losses above this amount can be carried forward into future tax years.
- Do you pay taxes on crypto if you reinvest it?
Disposals of cryptocurrency are subject to capital gains tax, regardless of whether you reinvest your profits afterwards.
- What happens if I donât do crypto taxes?
Intentionally not reporting your crypto taxes is considered tax evasion â punishable by fines and even potential jail time.
How we reviewed this article
All CoinLedger articles go through a rigorous review process before publication. Learn more about the CoinLedger Editorial Process.

CoinLedger has strict sourcing guidelines for our content. Our content is based on direct interviews with tax experts, guidance from tax agencies, and articles from reputable news outlets.