A Quick Note on Tax Loss Harvesting for Crypto

in taxes •  3 months ago 

In the broader investment markets, tax loss harvesting (TLH) is a common tool.

The idea is that as you get to the end of the year, you sell off some of your losers. That lowers or eliminates total aggregate capital gains, reducing your tax bill.

If you are a US taxpayer, crypto is treated as "property" for tax purposes. And that means you pay capital gains on sales for property that you have held over a year. So the same TLH methods will work for crypto as will work for stocks, bonds, and all the rest.

What is even more interesting is that wash rules don't apply to crypto. If you are selling stock and then buy it back within 30 days, then it's effectively a "wash" so the sale never happened on a tax basis. But that doesn't apply to "property" and thus doesn't apply to crypto.

So, theoretically, you could sell BTC on Dec 31, buy it back on Jan 1, and everything is copacetic.

Note: I am a tax professional, but not your tax professional. Do your due diligence.

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