Post
Topic
Board Legal
Re: How do I avoid tax on crypto
by
berrymenalo
on 30/01/2018, 01:48:26 UTC
The best way to avoid paying the most tax is to hold the crypto for over a year. If you hold for less than a year, this is qualified as a short-term swing or day trade. This qualifies for around a 40% tax rate (or something along those lines). If you hold for greater than a year, this is a long-term investment and is taxed at 10-15%, which is much lower. So my advice is, hold cryptos for over a year to avoid paying the greatest amount of taxes.

This is true for the most part. Capital gains is normally 20% (although it can scale down based on your personal income levels; certain exceptions may exist). Ordinary income rates are used instead of 40% but the highest ordinary income rate is 37% under the most recent tax bill.

Keep in mind, however, that if you are MINING the coins in a business, you are not entitled to long-term capital gain rates because the mined coins will be treated like inventory and inventory is a special asset class for purposes of US tax law. You can do some fancy footwork to get around this, but it involves multiple related entities and is complicated enough to deserve professional consulting to find the most efficient chain or link of entities.  

Furthermore, if cryptocurrencies (or just Bitcoin) is ever classified formally as a COMMODITY instead of a SECURITY, no coins will be entitled to long-term capital gain treatment because commodities, like inventory, have their own set of weird rules which also disallows capital gain treatment for the purposes of US tax law.