Category: Crypto Strategy

Tax Strategies for US Cryptocurrency Investors

Cryptocurrency investors are beginning to understand the tax treatment of their investments, and its complexity compared to dealing with traditional securities.

The US tax reform passed in December 2017 established that “like kind” treatment only applies to certain real estate transactions — not buying & selling cryptocurrencies. In the past, many crypto traders took the position that any crypto not withdrawn to fiat was a “like kind exchange” and therefore did not trigger a tax event. Even before the new tax regulations, this was a dubious, if not faulty assumption that goes against the IRS view cryptocurrencies should be treated as property for tax purposes.

As property, selling any cryptocurrency whether for another coin or fiat currency triggers a capital gain or loss, depending on the cost basis from when you acquired it. If you held the investment for over a year, it would be a long term capital gain (LTCG) taxed at a reduced tax rate from your marginal rate. If you racked up capital losses, you would only be allowed to deduct a maximum of $3,000 per year from ordinary income — but could carry forward indefinitely the unused losses to take as a deduction in future years.

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