Although 2022 has been a year to forget for most cryptocurrency investors, the daunting task of filing cryptocurrency tax returns before the end of December remains. Many investors are concerned about unrealized losses in their crypto portfolio, while failure to report crypto assets and transactions on tax returns could land North American investors in hot water with the IRS.
To help file your crypto taxes, the Accointing by Glassnode cryptocurrency portfolio tracking and tax system provides an easy solution to instantly import and review all crypto transactions and fill in your crypto taxes with just a few clicks. Moreover, the tax loss harvesting tool helps investors reduce what they owe in taxes.
How to improve your cryptocurrency tax return?
Most crypto assets, especially cryptocurrencies like Bitcoin, have seen significant price erosion in 2022. Some cryptocurrency investors may be tempted to reduce their tax bill by not reporting income. However, such a strategy would invariably lead to punitive action by the IRS. To avoid this, cryptocurrency investors in the US need to understand and take advantage of all available tax provisions to optimize their tax liability to the fullest.
For example, assume that losses from selling crypto assets exceed the capital gains accumulated by selling profitable positions. In this case, investors can deduct up to $3,000 from ordinary income and carry forward any remaining loss to the next accounting year. This surplus can then be adjusted against any capital gains that arise in the following year.
Investors can also sell digital assets that are trading at a price lower than their acquisition cost, only to buy them later during the same year. Although the IRS excluded stocks and securities from this tax saving tactic, crypto assets are not treated reciprocally. As a result, the realized loss can be used to offset any capital gains tax while also allowing investors to keep their net worth.
How Crypto Tax Loss Harvesting Reduces Your Tax Bill
When the investor makes a net profit from all crypto transactions in a year, positions that are currently incurring a loss equal to the accumulated capital gain can be sold. The loss from these positions can offset a portion of the capital gains, thus reducing your total taxes. This method of claiming is known as tax loss harvesting. However, contrary to popular perception, harvesting tax losses is not the same as realizing losses and involves many calculations.
The biggest challenges are deciding which crypto assets to sell as well as calculating the range of loss applicable to those positions. Positions sold within 365 days are subject to short-term capital gains tax rates, while positions held for more than a year are treated as long-term capital gains.
Say “hello” to Accointing’s global crypto tax calculator
Many of the crypto tax calculator providers on the market charge a monthly fee, which makes these tools unavailable to most retail crypto investors.
This is where Accointing’s compliance and portfolio tracking solution can benefit its 27 million US cryptocurrency investor base. Our comprehensive crypto tax calculator is available for free through December 31, 2022 and shows you exactly how much you can save on taxes this year.
Using the tax loss harvesting tool, investors can review which cryptocurrency tokens to sell in order to offset any capital gains, making tax loss harvesting a simple activity. Plus, it only takes five clicks to get an accurate tax report for transactions that occur within 2022, with Accointing’s crypto tax calculator capable of generating reports for wallets containing up to 50,000 transactions in a calendar year.
With just a few days left before the end of 2022, Accointing’s crypto tax software can save crypto investors a lot of hassle and help them improve their tax returns with a valuable tax loss harvesting tool. With Accointing being acquired by cross-chain market intelligence provider Glassnode in October 2022, its users will finally benefit from the combined investment intelligence insights provided by both companies.