How do you avoid tax on cryptocurrency?

There are various ways to avoid crypto taxes – including IRAs, gifting, donations, loss-harvesting, and using annual capital gains allowances. How is crypto taxed? Profits made on cryptocurrency investments that have been sold are subject to capital gains tax. How can you legally pay less tax on Bitcoin?

Do you owe tax on crypto?

Unfortunately, the crypto tax rules remain a bit complicated. The IRS clearly states that crypto may be subject to either income taxes or capital gains taxes, depending on how you use it. How Is Cryptocurrency Taxed? First off, you don’t owe taxes on crypto if you’re merely “ hodling ,” as aficionados would say.

Can crypto investors avoid paying taxes?

In terms of the former, the way that investors can avoid paying taxes is not to sell their crypto holdings. Tax is only calculated on the capital gains made from an investment position – and capital gains only occur when the trade is exited, and a profit is made. If the position is never exited, then there’s nothing to tax.