10 Easy Ways to Reduce the Crypto Tax Payment in 2023

In order to abate overpaying taxes and fines, we gathered ten easy ways to reduce crypto tax payments

The newest and most popular trend in the investment space is investing in cryptocurrencies. Though it is decentralization in nature, the revenue obtained from its purchase, exchange, or transfer is still subject to taxation by the government. To inhibit cryptocurrency exchanges that surpass traditional money, governments are imposing strict rules. To govern the Crypto Tax payment in 2023. In this article, we gathered ten easy ways to reduce crypto tax payments.

Implementing these ten measures could help investors from avoiding fines and paying additional taxes in light of the recent tightening of regulations governing cryptocurrency taxation in some countries.

1. Long-term investing- Waiting to sell the assets while allowing them to mature as long-term property is the simplest approach to reducing the tax burden. Investors should keep in mind that if they keep crypto for longer than 12 months, their capital gains tax will be lower.
2. Implementing stablecoins for profits- Stablecoins are anchored to a foreign market and are therefore less volatile, the value of cryptocurrencies like Bitcoin or Ethereum is governed by the mechanism of demand and supply. Therefore, using stablecoins not only saves on taxes but also protects an investor's long-term commitment.
3. Gift cryptocurrencies- There are tax advantages to gifting cryptocurrency. Investors are not required to pay income taxes if they offer up cryptocurrency as a gift. Although individuals must file a gift tax return if they give something that has a fair market value of more than $15,000
4. Using a year with low income to your advantage- Profits from cryptocurrency sales are taxed at a rate determined by their taxable income. The selling of digital currencies during the low-income year is one alternative that one can consider as the calculations are done in this approach. A lower income guarantees a lower tax rate on earnings for that financial year.
5. Donate Crypto to a Good Cause- One can also think about donating the cryptocurrency to a worthy charity, similar to how they might give appreciated cryptocurrency to a member of the family. So, investors need not have to pay capital gains tax and might also be eligible for a substantial tax deduction that can claim on their tax return.
6. Get a loan for cryptocurrencies – Like selling the coin, getting a loan is not regarded as an action that is subject to taxation. A loan might enable anyone to save income, based on the rate of interest and the personal income category.
7. Make capital gains and losses equal- Cryptocurrency investors can minimize their tax liability by balancing investment returns with capital losses. This reduces the taxable income on cryptocurrencies or other valued assets by using any outstanding long-term investment income against any liabilities on digital currencies that are sold during the year.
8. Utilize cryptocurrency tax software: Using cryptocurrency tax software can assist to file taxes without hassle. It is not necessary to laboriously compute the capital gains for hours. Alternatively, one can automatically combine their exchange-related transactions.
9. Employ a cryptocurrency-focused accountant. A cryptocurrency-savvy accountant can recoup their expenses by figuring out ways to reduce tax liability.
10. Recover the losses: If some of the cryptocurrency investments have lost value, utilizing tax losses to compensate for future gains can assist anyone save money on taxes overall. The tax-loss collection involves deliberately selling the cryptocurrency at a loss in order to claim tax advantages.