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Key Takeaways
- While there’s no way to evade crypto taxes, there are strategies you can use to legally reduce your tax bill.
- Strategies like tax-loss harvesting, using crypto IRAs, and leveraging crypto tax software like CoinLedger have helped investors save thousands of dollars on their taxes.
In this guide, we’ll walk through 11 simple tips that can help you save thousands on your taxes.
Quick Look: 11 ways to minimize your crypto tax liability
11 ways to minimize your crypto tax liability
Let’s break down eleven strategies that can help reduce your crypto tax burden.
1. Harvest your losses
Selling your cryptocurrency at a loss comes with major tax benefits. That’s why many investors intentionally take losses to reduce taxes, a strategy known as tax-loss harvesting.
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.
Tax-loss harvesting has been a well-known strategy in the stocks and equities world for decades. However, cryptocurrency has a unique advantage — currently, tax professionals agree that crypto is not subject to the wash sale rule. That means you can sell cryptocurrency, buy it shortly afterwards, and claim a capital loss on your tax return.
2. Invest for the long term
The simplest way to minimize your tax burden is to wait 12 months or longer to dispose of your crypto.
Remember, the American tax code is set up to encourage long-term investment. Take a look at the difference between short-term and long-term tax rates:
- Short-term tax rates (less than 12 months of holding): 10-37%
- Long-term tax rates (12 months of holding) : 0-20%
If you’re close to the 12 month mark, you may want to consider holding for a bit longer to take advantage of lower tax rates.
3. Take profits in a low-income year
The lower your income during the year, the lower the tax rates you’ll pay on your cryptocurrency disposals.
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.
4. Give cryptocurrency gifts
If you give cryptocurrency away as a gift, you have no income tax obligation in most cases. While gifts with a fair market value above $18,000 require you to submit a gift tax return, this form is primarily for informational purposes.
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.
For more information, check out our blog on how cryptocurrency gifts are taxed.
5. Buy and Sell Cryptocurrency Via Your IRA or 401-K
Retirement accounts are designed to help investors build wealth while minimizing their taxes. You can invest in cryptocurrency ETFs through your retirement account, or use a self-directed IRA to invest in crypto directly!
Self-directed IRAs allow investors to directly invest 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 $7,000 a year in total to all of your IRAs, including self-directed IRAs.
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.
6. Hire a Crypto specialized CPA (Certified Public Accountant)
Navigating the tax code on your own can feel overwhelming. That’s why you may want to consider enlisting the help of a professional.
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.
It’s important to note that not all accountants have deep knowledge of the cryptocurrency ecosystem, so it's important to find a tax professional with experience in the space. You can get started by looking at our list of verified cryptocurrency tax accountants.
7. Give a cryptocurrency donation
Cryptocurrency donations can be a great way to contribute to meaningful causes. In addition, donating crypto comes with the following tax benefits:
Non-taxable disposal: Donating cryptocurrency is one of the few occasions when disposing of cryptocurrency is not taxed.
Write off your donation as a tax deduction: You can write off your cryptocurrency donation as a tax deduction based on its fair market value at the time of the donation.
8. Take out a cryptocurrency loan
Thinking about selling your cryptocurrency? Unfortunately, these ‘disposals’ can lead to a large tax bill — 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.
Taking out a loan is considered a non-taxable event. That means you’ll be able to get access to fiat currency without selling your crypto and getting hit with a large tax bill.
9. Move to a low-tax state/country
While it may seem like an extreme step to take, some investors do choose to relocate to different regions with more favorable tax rates.
Currently, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have no income taxes.
Some investors go as far as to relocate to countries that don’t tax cryptocurrency. Currently, countries like the United Arab Emirates and Malta don’t tax capital gains for individual investors.
10. Keep careful records of your crypto transactions
It’s important to keep careful records of your cryptocurrency transactions so that you can file your taxes accurately.
In cases where you can’t find your original cost basis for acquiring your cryptocurrency, you may be required to recognize 100% of your proceeds as a capital gain — which means you could be paying significantly more in taxes!
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 haven’t 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. The platform can help you identify your biggest tax-loss harvesting opportunities and report your taxes in minutes.
There’s no need to spend hours poring over spreadsheets of your cryptocurrency transactions. Instead, you can automatically import your transactions from exchanges like Coinbase and wallets like MetaMask and generate comprehensive tax forms in minutes.
Once you’re sure your information is accurate, you can plug your crypto tax reports into filing software like TurboTax or TaxAct.
How do crypto taxes work?
Before you get started leveraging strategies to minimize your tax bill, it’s important to understand the basics of how cryptocurrency is taxed.
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.
Ordinary income tax: If you earn income in the form of cryptocurrency, you’ll 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.
Is avoiding crypto tax legal?
It’s important to draw a distinction between tax avoidance and tax evasion.
Tax avoidance: Taking steps to legally reduce your tax bill.
Tax evasion: Intentionally not reporting or misrepresenting your income.
While tax avoidance is legal and practiced by millions of taxpayers, tax evasion is a crime with serious penalties.
Starting in 2026, all cryptocurrency exchanges in the United States will be required to issue Form 1099-DA to report capital gains and losses — which means the IRS will have more information at its disposal to crack down on tax evasion.
How much tax do I pay on crypto?
The tax rate you pay on cryptocurrency varies depending on your holding period and whether your income is classified as income or capital gains.
Income/short-term capital gains
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%).
Long-term capital gains
If you dispose of cryptocurrency after more than 12 months of holding, your cryptocurrency will be taxed as long-term capital gains (0-20%).
Want to estimate your crypto tax bill? Check out our free crypto tax calculator.
How do I avoid crypto taxes in other countries?
Want to know more about how to avoid crypto taxes in your country? Here’s a list of guides to help you legally reduce your tax bill — no matter where you’re located!
- Avoid Crypto Tax in Australia
- Avoid Crypto Tax in the UK
- Avoid Crypto Tax in Canada
- Avoid Crypto Tax in New Zealand
- Avoid Crypto Tax in Ireland
- Avoid Crypto Tax in Germany
- How to Cash Out Crypto Without Paying Taxes (USA)
Start managing your crypto taxes today.
Looking for a platform that can help you save time and money this tax season? Try CoinLedger.
More than 500,000 investors from all across the world use CoinLedger to generate complete crypto tax reports and find tax-saving opportunities in minutes.
Frequently asked questions
- How can I avoid cryptocurrency taxes?
- Can the IRS track Bitcoin?
- Do you have to pay taxes on cryptocurrency if you spend it?
- Do you pay taxes on crypto losses?
- Do you pay taxes on crypto if you reinvest it?
- What happens if I don’t do crypto taxes?
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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.
