Five ways to reduce your cryptocurrency taxes

Tax saving in Crypto trading

Being a cryptocurrency trader or investor, paying a high amount of money as taxes per annum is important. According to the last update issued by IRS, it is a punishable offence and the taxpayer has to be sentenced with the imprisonment of 5 years along with imprisonment of approx $250,000. Crypto currency taxes would be levied on the basis of the gains or losses undergone in the process thus creating taxable events. Earlier, the rule was to involving the tax of cryptocurrency on every transaction. But later the further clarification of the guidelines has been done to the taxation of cryptocurrency in 2014.

So that, some relief can be provided to the taxpayers and they can enjoying the trading with digital currency seamlessly. This clarification for updating the guideline has been proposed in the house of legislation by Congress. Now, these events include trading with cryptocurrencies, Coin and token exchanges, receiving cryptocurrencies as payment or making exchanges, Mining of cryptocurrencies, and Air-drops. Therefore, many investors are looking forward about some tricks which can be used for their seamless trading activities.

Reduction of cryptocurrency taxes

Traders look for opportunities so that they can avoid or make reduction over the amount of tax they would have to pay. Here are some guidelines:

Gifting or donating to charities

Donating to charity

There are opportunities with the traders to gift or giving away the cryptocurrencies. Such giving away would help them in avoiding crypto tax. Gifting will not be treated as a taxable event. According to the rules thus published, individuals are allowed to make gift approax $15000 where no document is required to show.

When gifting or donating amount exceeds the stipulated sum, gift tax return would be needed to fill up. However, while the recipient of gift makes an encashment of it, the same will become a taxable event. In this case, the taxable value of the gift is fixed at the market rate on the day on which such gifting of donating event took place.

The advantages with Self Directed IRA

The facilities of dealing with cryptocurrencies can also be availed by using the retirement plans. These plans have their innate features of dealing under tax-free environment. Thus, smart investors utilize the opportunity by investing the Self-directed IRA or Solo 401(k).

The cryptocurrencies are treated as virtual assets by the IRS and also managed by it. Thus, being a crypto trader, if you want to enjoy the tax-free cryptocurrency; then purchase it with the Solo 401 (k). You earning will be directly flowed to the associated account of retirement plan without triggering the taxable event. Moreover, the cryptocurrency which are bought with the help of ROTH IRA are also tax exempted.

Forming of an Offshore LLC

Offshore LLC formation in IRA opens up the opportunities for opening international bank accounts. This type of structure enables the IRC investment easier into the LLC. This even allows the investor acquiring the managing role of the LLC in which all the funds that have been put in the account.

While the investor is going to manage the funds under offshore IRA LLC, there are definite cryptocurrency tax calculators. After obtaining the position, you have to follow some rules. If the management of the fund is under your offshore IRC, then according to IRS rules you cannot borrow from your account. It will be treated as the investment decision of the Professional Investment Advisor.

Purchasing International Life Insurance Policy

The investor with cryptocurrencies might also opt to purchase an International Life Insurance Policy. Such purchase would prove helpful in reducing or eliminating the taxes on capital gains. The minimum investment over such policy is 2.5 million USD and the fund is used in purchase cryptocurrencies

These types of policies could be funded with the fund one has under its disbursal. There is no limit for contribution or distribution.

The tax department of the country treats private placement policies in the similar ways as with the traditional IRA. Under this scheme, taxes are put on hold till disbursement or closing of the policy.

The principle has an intrinsic beauty. The benefit of tax exemption passes to the heir while policy is maintained after the death of the policy-holder. You can even use the crypto software like zenledger for calculating the amount which can be exempted.

Becoming residential of Puerto Rico

The citizens of United States have to pay taxes on their earning irrespective of the place they are residing. There is only one exception to the list and that is the island of Puerto Rico in the Caribbean. No earning made on that island will be taken into consideration as taxable as per the rules in the US.

Therefore, multiple entrepreneurs as well as investors of cryptocurrencies have formed residency in that land.

But, in order to have the perquisites, the person demanding such facility would have to spend for 183 days in a calendar year into the island.

Earning in the land of Puerto Rico would be considered as Capital Gain or a business while the earning qualifies under Act 20 or 22.

From the above discussion, it is clear that if you are truly willing to make any investment or trade in the cryptocurrency form, you have some prudent plans for tax minimization. It is important for the residents of any countries including USA to begin the trading some strategy of the taxation. Moreover, from 2015, the IRS is more concerned about the evading taxpayers who are not reporting.

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