Save Big on Crypto Taxes: 7 Easy Strategies for 2024
As we near the end of 2024, it's time to consider one of everyone's favorite topics: saving on taxes.
If you’ve got crypto assets, there are plenty of ways to lighten your tax load without getting into the weeds.
Here are seven simple, effective strategies you can use to reduce your crypto tax bill before 2025 rolls in.
7. Charitable Donations: Give and Save
One of the most satisfying ways to lower your taxes is through charitable donations.
But here’s a twist: instead of donating cash, consider donating cryptocurrency.
Why?
When you donate appreciated crypto directly, you avoid the capital gains tax you'd otherwise owe if you sold it first.
For example, if you bought an asset for $1,000 and now it's worth $4,000, cashing it out would mean tax on the $3,000 gain.
Giving the crypto directly to charity avoids this tax. The charity cashes it out and benefit from a larger donation. Charities don’t pay capital gain taxes, so everyone (except the IRS) wins.
6. Gifting Crypto: Share the Wealth, Tax-Free
Did you know you can give up to $17,000 worth of cryptocurrency (or cash) to friends or family without paying a gift tax?
That’s right.
And if you're married, both you and your spouse can gift $18,000 each to the same person, essentially doubling the tax-free gift.
Even if you exceed the $17,000 per person limit, you just need to file a gift tax return—no extra tax is due immediately.
This can be a smart way to reduce your taxable estate while sharing the crypto love.
5. Tax Loss Harvesting: Turn Losses into Wins
If you've been HODLing some underperforming crypto (we all have), tax loss harvesting can help.
This strategy involves selling your losing assets to claim a loss, which can offset gains from your winners.
The key is that you must actually dispose of the asset—don’t worry, there are marketplaces where you can sell near-worthless coins for pennies just to realize the loss.
This is especially useful if you've had a strong year in the market and need a way to trim your taxable gains.
A spin on tax loss harvesting is the “wash sale,” which involves selling a losing asset and then buying it back at a lower price.
While it might seem like you're just taking a temporary loss, the benefits are real—you can offset current gains with the loss while potentially securing future profits when the asset rebounds.
Heads up: while wash sale rules don't apply to crypto under current IRS guidance, this might change in the future.
4. Long-Term Capital Gains: Hold for the Win
One of the simplest strategies is to HODL your crypto for over a year before selling.
By doing so, you qualify for long-term capital gains rates, which are significantly lower than short-term rates.
For most people, long-term rates are 15% or 20%, compared to short-term rates that can range from 22% to 35%.
If you’re not in a rush to sell, this is an easy way to save.
3. Move to a Low-Tax State: Cut Your State Tax Bill
State taxes on capital gains can vary wildly, so why stay in a high-tax state if you don’t have to?
For example, California’s capital gains taxes can go as high as 13% but states like Florida, Texas, and Wyoming have no state income tax at all.
While moving isn’t a small decision, it can lead to substantial savings, especially if you’re planning to cash out a large chunk of your portfolio.
2. Safe Harbor Plan: Prepare for 2025
Big changes are coming in 2025 regarding how the IRS calculates cost basis for crypto.
Implementing a Safe Harbor Plan now could save you from higher taxes later.
If you don’t document your plan by the end of 2024, you will face unfavorable cost-basis calculations when you sell in the future.
For more details, head over to CryptoTaxAudit.com/1099 and get started.
This is a must if you’re serious about minimizing your tax bill in the coming years.
1. The Ultimate Strategy – Move to Puerto Rico
If you're ready to make a serious move, Puerto Rico might be your ticket to massive tax savings.
By taking advantage of Act 60 and living in Puerto Rico for at least six months, you could eliminate capital gains taxes entirely—both in Puerto Rico and in the U.S.
It’s a complex strategy, but for those with significant crypto holdings, the potential tax savings are enormous. Be sure to consult a tax expert to navigate the requirements.
Bottom Line
By using these strategies, you can significantly reduce your tax burden in 2024.
With the right strategies, you can protect your capital, reduce your tax burden, and stay compliant with IRS regulations.
Whether it’s donating to charity, gifting crypto to loved ones, or making a big move to Puerto Rico, there are plenty of ways to save as 2024 comes to a close.
For expert guidance and personalized strategies tailored to your crypto portfolio, CryptoTaxAudit has you covered.
Schedule a call with us today and get peace of mind knowing your crypto taxes are in expert hands—start saving today!
