Crypto winters can mean big tax savings

Although it may seem counterintuitive, crypto losses can technically help you save money.

The IRS treats cryptocurrencies as property rather than currency, and investors incur standard capital gains and losses on their trades.

The IRS allows taxpayers to use losses in crypto investments, as well as stocks and other investments, to offset gains. Not only can you use crypto losses to completely offset any gains you may have made in stocks or other trades, but if you lose more than you gain in a year, you can deduct up to $3,000 against your taxable income. If you lose more than $3,000, it can even be carried over each year until you die to offset gains in future years. Long story short, crypto losses don’t have to be all bad, they can be triggered for you.

All this said, you need to sell the cryptocurrency to take the capital loss – even if the value has fallen on paper.

The ability to use losses to offset gains is something crypto investors may want to consider taking advantage of now that the market has entered what is known in the industry as a crypto winter.

Crypto winters are when prices contract and stay low for an extended period. High inflation has caused the Federal Reserve to raise interest rates, which no doubt has a big impact on crypto.

The crypto market has fallen 50% since last November, falling from $3 trillion to less than $1 trillion in June, according to data website CoinMarket Cap.

Crypto winters usually start when there is a big sell-off from the all-time high in the price of Bitcoin BTC/USDwhich hit a 52-week high of $68,990 last November before nosediving.

Crypto complicates taxes

Crypto is relatively complicated, so having software to track transactions can be helpful. Even if everything is recorded on the blockchain, it can be difficult to extract data for accounting purposes.

Consumers, accountants and tax professionals can turn to services such as Ledgible for help

Atlanta-based Ledgible, which reports that it is integrating with QuickBooks, Xero Ltd. XROLF and any other tax or accounting software, provides Ledgible crypto data across the tax and accounting space, for professionals, consumers and even leading institutional partners such as FIS FIS.

The company’s professional tax software is designed for the professional market, including accounting firms, certified public accountants (CPAs), tax preparers and the customers who use these services.

Ledgible says forms can connect customers’ portfolios and automatically calculate gains and losses to properly report crypto transactions.

The accounting software serves businesses, companies that hold crypto, and banks and institutions that handle crypto. The Ledgible Crypto Enterprise Accounting application is intended to streamline cryptocurrency and digital asset accounting operations for businesses and institutions so that they legible.

Learn more about Ledgible here.

This post contains sponsored advertising content. This content is for informational purposes only and is not intended as investment advice.