Tap into crypto tax harvesting with Ledgible
While the crypto space is seeing growth in its adoption worldwide, there are also new reforms and regulations coming up around the world. In the US, traders and investors are required to pay taxes on both crypto and digital assets. Failing to report or pay taxes would result in interest penalties and potential criminal charges especially as the enforcement around digital assets is gaining more momentum.
Tax-loss harvesting is a strategy that would help investors lower the amount of tax they have to pay to the government. Crypto tax-loss harvesting refers to realizing crypto losses to offset capital gains and lowering the tax burden.
Usually, investors use this method near the end of the year when they can get an approximate of their total profits or during market dips when the losses are the highest. This strategy is similar to that of other year-end mutual fund payouts or digital currency gains.
Ledgible is a leading crypto tax and accounting platform that helps users determine their crypto liabilities and deliver it to tax and accounting systems thereby helping out traders and investors with an audited solution. The platform is built by professionals for the professional market and normalizes crypto data in the user’s workflow.
Washing out losses
Since cryptocurrency is not considered to be a ‘security,’ the wash-sale rule does not apply to it yet. Investors who have lost value in a crypto position can sell the investment, get the capital loss, and reinvest into the same cryptocurrency immediately without violating the wash-sale rule.
The wash sale rule disallows the deduction of losses on a security sale if the investor has acquired substantial identical securities or any related options within 30 days of its sale. This rule interferes with the tax loss harvesting strategy; however, the IRS (Internal Revenue Services) does not recognize crypto as security yet.
The lack of a wash sale rule application on crypto lets users take advantage of it with crypto letting them book their losses, harvest it, and then buy back into the crypto. This allows them to maintain their exposure to the asset for future gains but also book the capital losses onto their current tax year and push their tax burden down the line to future tax years.
Additionally, capital losses in cryptocurrency do not necessarily need to be used to eliminate capital gains exclusively in crypto. They can be used to decrease the tax liability on other asset classes like stocks, bonds, and real estate.
Ledgible is a professional-first crypto tax and accounting platform that aims to determine crypto liabilities and deliver data to tax and accounting systems that people already use. It is an AICPA (American Institute of Certified Public Accountants) SOC 1 and 2 assured tax reporting and portfolio tracking platform that provides use cases for professionals, consumers, and enterprises.
The platform released a crypto tax guide in collaboration with Blockworks with the aim of leveraging its internal expertise in the crypto tax space. Ledgible’s core focus lies in building scalable software solutions that allow investors and institutions to integrate crypto data into their existing financial systems. Apart from this they also create, curate, and organize crypto-related learning content for industry professionals, majorly focusing on building their knowledge base as a hub for financial professionals.
For more information on Ledgible, please check out their official website.
Disclaimer: This is a paid post and should not be treated as news/advice.