Biggest Mistake Is Not Paying Tax: Paying Tax Is Best Strategy

  • Tax-loss harvesting is when an investor sells at a loss to reduce the amount of capital gains
  • Tax-loss harvesting is the last opportunity for investors who lost money in the market.

According to Talwar, this is the last opportunity for investors who lost money in the market during 2022 to disclose the loss and “try and get some of that benefit” by offsetting it against any profits earned the year prior.

When an investor sells at a loss to reduce the amount of capital gains tax due from selling successful assets, this is known as tax-loss harvesting.

The biggest error people make, according to Talwar, is not realizing they may use tax loss harvesting.

Harvesting Tax Losses Through Crypto

Similar to stock investors, cryptocurrency investors can use duty loss harvesting.

An investor who purchased a crypto token in April 2022 for $10,000 and held it in December 2022 for $7,000 would have had an unrealized loss of 30%. They might use the $3,000 they lost when they sold the investment to reduce other taxes they owing for the fiscal year. Additionally, the loss might be carried over to the following tax year.

It is not necessary to spend all of the capital losses incurred in cryptocurrency for harvesting in cryptocurrency assets. The tax obligation on other asset classes, such stocks, bonds, and real estate, can be reduced by using losses.

Paying Tax Is The Best Strategy

Talwar thinks that once the IRS provided clarification, anyone affected by coin frauds or exchange failures like FTX could not be qualified to claim such losses as losses.

People were questioning if they could claim losses on items like FTX or even rug pulls, so the IRS actually clarified the approach on that, he added.

Ultimately, according to Talwar, “the best strategy is to actually pay tax” and obtain expert counsel before tax season. Finding out what reliefs and benefits are available can be done by speaking with an accountant.

Using an accountant can undoubtedly assist in navigating any complication or issue related to what to perform.

According to Talwar, those who don’t have their paperwork ready have the option of requesting an extension, but they will “still have to pay the taxes by April 18.”

There Are Some Limitations To Tax-Loss Harvesting

After deducting additional investment gains, the maximum amount of regular income that can be offset by tax losses is $3,000 ($1,500 if you’re married and filing separately).

Investors must collect their cryptocurrency losses by the end of December since earnings and losses are locked in at the conclusion of a duty time.

As the bitcoin market continued to experience new lows throughout the year, this will be effective in 2022. After starting the year around $47,000, Bitcoin is currently trading barely below the $17,000 mark in December.

To harvest losses during a bull market, however, could be problematic, especially if the “wash-sale” rule applies to cryptocurrencies in the future



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