Bitcoin Investors Could Enhance Tax Savings by Selling and Repurchasing their Crypto Assets
According to a recent article published by The Wall Street Journal (WSJ), investors should sell and re-purchase their Bitcoin (BTC) in order to reduce the amount of taxes paid. The WSJ suggests that one of the positive things about the current bear market is that it gives a tax break.
In the United States, the Internal Revenue Service (IRS) considers virtual currencies as an investment property. This is similar to stocks but different to a currency. Short-term gains and losses in the country are subject to taxes that go as high as 40.8 percent. Long-term gains and losses have a 23.8 percent tax.
Nevertheless, users can sell their virtual currencies and reinvest their funds in cryptocurrencies once again. Losses can be used also to reduce taxes on gains. That means that if a U.S. investor reinvests its funds once again in crypto, they could have potentially larger tax reliefs.
According to Jim Calvin, a CPA and crypto analyst at Deloitte Tax, explained that users can wait an hour or a day if they want to repurchase their crypto-related assets to be in the right side of the law.
Regulatory agencies are trying to understand how to better regulate the virtual currency market. In general, crypto investors do not tend to report capital gains from crypto. Indeed, just 0.04 percent of tax filers informed their investments to the IRS.
The United States is not the only country that is trying to impose better regulations on the crypto space. Japan and Thailand are two other examples of countries trying to improve their control over the market.
Back in October, the Japanese government proposed to change the cryptocurrency tax filing system in order to enhance accuracy and compliance.