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Tax Loss Harvesting for Cryptocurrency investing with ZenLedger.io

Tax Loss Harvesting for Cryptocurrency investing with ZenLedger.io
Tax Loss Harvesting for Cryptocurrency investing with ZenLedger.io

Tax Loss Harvesting for Cryptocurrency investing with ZenLedger.io everyone my name is Pat Larson on the CEOs and Leger day Oh were a software that helps CPAs and individuals with their accounting and tax around cryptocurrency investments and weve just released a crypto tax loss harvesting tool in our software and Id like to tell you about and give you a couple tips before the end of the year to help you out so general disclaimer make sure you get your own advice from your own lawyers and tax professionals this is informational please do your own research but we are trying to be as helpful as possible here so its been a rough year for everybody many Lambos have been wrecked and this rollercoaster ride really hasnt been that enjoyable for most people as Bitcoin went from nineteen thousand five hundred down to about thirty five hundred today and most of the altcoins have had a similar ride if not worse so stinks for everybody whos written it down but you do have a chance right now to do some smart accounting and tax things to help you out in 2019 and going forward so the IRS does tax you on your capital gains so if you invest a thousand dollars in stocks or in crypto and say it goes up twenty percent you make two hundred dollars of capital gains and then you are taxed on that two hundred dollars of capital gains based on short term long term and you know your income brackets and things like that but on the flip side of that if you invest a thousand dollars in crypto and it goes down twenty percent youre down two hundred dollars and if you realize that capital loss you now have a two hundred dollar tax loss asset that you can put against capital gains or against your income up to three thousand dollars and you can even put it against your real estate gains so if you sold a house in 2018 and youve lost some money in crypto you can actually put some of those crypto losses against the gain on that house note that Congress still needs to write a lot of laws that give us more visibility into how crypto currencies should be accounted for and taxed and then the IRS has to set those policies and you know the tax courts have to figure stuff out too so were still very early days in tax policy for crypto currency and were giving you the best advice that we can based on the CPAs and Lauren talk to you and you should talk to your own so what is a realized lost so it doesnt its not just good enough that you bought crypto you know one Bitcoin that a thousand and I went down to eight hundred what you have to do is you then have to sell it when its down and then you realize that loss and you actually then hold a tax loss asset so the year end is coming up December 31st so if you want to sell coins now at a loss you need to do it before December 31st so that you get a tax benefit in your 2018 taxes and you can sell you know maybe you own some Bitcoin on your wallet and then you own some in the coin base and you dont some in finance and you bought them each at different times throughout the year its okay to sell from any of those exchanges or wallets peertopeer exchange you dont have to pick exactly which one to sell from any of them are okay its in like the same bucket for accounting the the other thing you can do is realize that theres no wash role in crypto right now theres no law that specifically says that the wash rule applies to crypto currency in stocks you have to wait 30 days or you have to wait till your end right now with the best advice that weve heard there is no watch rule for crypto so you could actually sell your crypto currency today you know say its December 15th and buy it back right after you sell it and then you would have realized a capital loss youd have a capital tax loss asset and you would have your cryptocurrency or you could wait till January first and the start of a new accounting year or you could you know keep your cash and wait you know till you want to to get back into the markets so let me explain life on FIFO really quickly there are two different accounting ways of looking at when you sell an individual coin like what the cost basis was so first in first out it means that if you bought cryptocurrency in January and June and are selling in December you would first sell off the cryptocurrency bought in January at the price points the cost basis you established in January and then if you kept selling more than you would start eating into the cryptocurrencies ezal you bought in June so whats important there is that since prices have basically been going down since January FIFO is very beneficial to you because the prices have gone consistently down over time but also its the more defensible accounting practice when you talk to cryptocurrency tax experts theyll say that LIFO is pretty questionable as a treatment and the FIFO is by far the more conservative more defensible role so our software defaults to FIFO we suggest to use FIFO and in this year its actually quite beneficial to use FIFO also once you pick FIFO or LIFO you need to be consistent going forward from there so for you if this is the first year youre doing your taxes 2018 and you select FIFO then 2019 2020 youll be selecting FIFO as well so something to consider touch your CPA about that Im gonna quickly show you on our software what it looks like heres your dashboard you know you can do multiple years of taxes download several stock tax reports like scheduled DNA 949 and spreadsheets but for tax loss harvesting what you would do is you would go over to tax loss harvesting tab then you would click on click on this green button and well send you an email or itll pop up in a new tab and what youll see is a spreadsheet here where we have a nice summary of all the coins you hold will tell you how many of each coin you hold and will tell you if you sold all of that coin how much in tax losses that you could harvest and put towards any gains or save for next year so if in 2019 you you know have a bunch of gains you can put your 20 Knossos towards them say you have ten thousand dollars of tax losses capital tax losses that you reap in 2018 and then in 2019 s great year and you have twenty thousand dollars of games you have that twenty thousand games you the ten thousand losses and then youre only paying taxes on ten thousand of games for 2019 thats how tax loss s that works you apply it going forward so you look here you see which coins you have and you can decide which ones you want to sell maybe you want to hold on to some you want to sell others you want to buy back in now you wait till they go up its all your decision but you can see whats there and if you want some more granularity you pop over another tab and theyll tell you you know by amount of coins how many you sell so theres a lot more granularity here so you know generally people dont just buy once into a coin they buy in overtime at different prices and you know sometimes those prices are up from where you started or down and theres different tranches theyll give you different assets so its very granular here you know that if youve sold your first tranche of Eos I have 40 of them that are a certain price point where if I sold all 40 I would get three hundred and thirty three dollars of tax loss asset if I sold eight more I would get another 66 so if I sold forty five more than another 375 so in total if I sold those you know 93 EOS I would have seven hundred and seventy five dollars of tax loss asset and so you can go through and very granular you decide how much tax loss asset you want to harvest and you know put towards games in 2019 going forward or put towards your 2018 income taxes you can actually have up to three thousand dollars of income tax that you can offset so I hope this was helpful its been a rough year for everybody and we just wanted to make sure that you are aware that you can harvest tax loss assets to help you out in your taxes going forward please visit us at Zen ledger IO or email us at hello at Zen ledger IO thanks

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