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Strategies to legally reduce taxes after selling XRP


Cambridge
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Hello out there crypto world.

After holding onto XRP for over a year, I know there is a long-term capital gains tax when I decide to sell.

I've never sold XRP. I've only purchased. 

What are strategies that you are using to reduce tax obligations?

I'm curious to see what others are doing.

 

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5 minutes ago, Cambridge said:

I'm curious to see what others are doing.

Your lack of helpful context leads me to guess you're under UK tax laws ?

I'm only familiar with USA's borked up mess.
Maybe someone from UK will help.
GL mate.

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money laundering is simple , about a 100 different ways to move and hide money , very simple way betting profits are not taxable . that is why so many bookmakers take crypto just do some arbitrage betting . 

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1 hour ago, JASCoder said:

Your lack of helpful context leads me to guess you're under UK tax laws ?

I'm only familiar with USA's borked up mess.
Maybe someone from UK will help.
GL mate.

Lol. 

I want to know what others are doing. It doesn't matter to me what country it is. 

Preferably USA, but if where you're at is better, I may move there. 

Do tell. 

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25 minutes ago, techpeter said:

money laundering is simple , about a 100 different ways to move and hide money , very simple way betting profits are not taxable . that is why so many bookmakers take crypto just do some arbitrage betting . 

I do not want to money launder. That is illegal. 

I am happy to pay taxes. I just know there are strategies to pay less so more of the profits are reinvested. 

I am happy to hear what others are doing, whether in the USA or somewhere else. The more information, the better. I'll verify with a licensed accountant and attorney when necessary. 

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8 minutes ago, Cambridge said:

Lol. 

I want to know what others are doing. It doesn't matter to me what country it is. 

Preferably USA, but if where you're at is better, I may move there. 

Do tell. 

Happy to share what little I know about the USA's position - about one year old info, so caveat emptor.

Every trade we execute is a "taxable event." Uncle Sam want his cut of the gain of every trade, regardless of what it is.

IIRC you can carry forward only one year's losses.

So if you traded some XRP for ETH in 2019 for a big gain, but sell your ETH today at a loss, you own the gov all his cut of the 2019 profit.

I lack hope we'll ever seen any reasonable  tax policies anytime soon.

You know once our gov wanted a cut of your poker winnings, REGARDLESS of any poker loses in the same year ?!!
It took a HERO player to SUE the IRS for the right to deduct losses.
Don't get me started !

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46 minutes ago, JASCoder said:

You know once our gov wanted a cut of your poker winnings, REGARDLESS of any poker loses in the same year ?!!

It took a HERO player to SUE the IRS for the right to deduct losses.
Don't get me started !

Yeah, it's a fascinating story - with lots of good lines:

https://en.wikipedia.org/wiki/Baxter_v._United_States

(The Nevada judge who heard the case ruled in favor of Baxter, declaring "I find the government's argument to be ludicrous. I just wish you had some money and could sit down with Mr. Baxter and play some poker.")

ETA:  I'm shocked that there hasn't been a book or a movie, yet...

Edited by NightJanitor
Everybody loves a good underdog story.
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Thank you guys for sharing! Someone told me to move to one of the nines States where there isn't a state tax.

For me XRP is a speculative bet, so I'll let it ride for a few years. If it goes parabolic, say after the SEC lawsuit and things are favorable, I'd like to figure out a way to pay less on taxes. Where I currently live, I'd pay over 30 percent of any gains in taxes. Not that I have much money in this but I'd like to keep as much of it to reinvest if possible. 

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5 hours ago, Cambridge said:

Thank you guys for sharing! Someone told me to move to one of the nines States where there isn't a state tax.

If you make huge gains I recommed you to move to another country with no capital gain taxes.

In Switzerland for instance you don't have to pay any capital gain or income tax on cryptocurrency. You basically pay taxes for your fortune, the percentage you have to pay is very low.

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First off, you get $80K of capital gains at 0% Federal tax ... adding in your standard deduction of $24,800 (married, jointly) means $104,800 of gains per year tax free. 

Want even more? You can easily reduce your taxable income by contributing to a traditional IRA ($12,000 married jointly) and/or an HSA ($7,100).

That gets you to $123,900 per year of GAINS tax free. 

I highlight the word "gains", because that doesn't mean proceeds from sales ... it means profits. Since you've bought in the last year or two, in order to make that much GAIN, I would (roughly) estimate that you have that much of a basis because the price hasn't varied terribly much in the last couple years. So, assuming a better case scenario and that you doubled your money....

We're now we're at $247,800 from selling your XRP ... and without paying penny in Federal tax. 

That's about as good as it gets. 

On the down slope, if you had a job in 2020, then your income from it directly cuts into the allowable $104,800, as does any interest, dividends, and other income. Obviously the cost basis of your XRP purchase price changes things. 

If you had ur XRP in an 'interest' bearing place like Nexo, Crypto.com, Bitrue, etc., then you have to remember: It ain't "interest". The IRS says crypto is property. When someone gives you money to use your property, it's called rent. Rental income is very different than interest income in that rental income expenses are deductible. That's a hole other fun avenue :-) Point is, that 'rental' income cuts into your allowable "free" capital gains too. 

...

For most people, the key numbers are their income less $80K...and to max out IRA & HSA.

If you're well below these numbers, don't worry about your gains. 

If you're above them, then you should of done the math before Dec 31 to maximize your capital gains with minimal tax. If you didn't do the math then, then you know to do so in Dec 2021 ;-) ... Trust me, I conduct a lot of transactions on Dec 31 and Jan 1 ...silly what a difference an hour can make. 

As to state tax .... it varies. For example, there are no federal taxes at all in Puerto Rico cuz it's only a territory....AND PR doesn't have capital gains as part of its income tax, . but there are some hoops to jump through that you might find onerous 

If you're a whale, I'd  recommend looking into a golden visa and Portugal. No cap tax there on crypto at all. Cheaper than Switzerland...sunnier too. Consider the Azores. 

 

Hope something in all that is of value .. 

 

 

 

 

  

 

 

 

 

 

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3 hours ago, baggy23 said:

If you make huge gains I recommed you to move to another country with no capital gain taxes.

In Switzerland for instance you don't have to pay any capital gain or income tax on cryptocurrency. You basically pay taxes for your fortune, the percentage you have to pay is very low.

Same in the Netherlands. I'm so glad I don't have to take taxes into account for every trade. Makes building a tradingbot a lot easier too!

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19 hours ago, RobertHarpool said:

First off, you get $80K of capital gains at 0% Federal tax ... adding in your standard deduction of $24,800 (married, jointly) means $104,800 of gains per year tax free. 

Want even more? You can easily reduce your taxable income by contributing to a traditional IRA ($12,000 married jointly) and/or an HSA ($7,100).

That gets you to $123,900 per year of GAINS tax free. 

I highlight the word "gains", because that doesn't mean proceeds from sales ... it means profits. Since you've bought in the last year or two, in order to make that much GAIN, I would (roughly) estimate that you have that much of a basis because the price hasn't varied terribly much in the last couple years. So, assuming a better case scenario and that you doubled your money....

We're now we're at $247,800 from selling your XRP ... and without paying penny in Federal tax. 

That's about as good as it gets. 

On the down slope, if you had a job in 2020, then your income from it directly cuts into the allowable $104,800, as does any interest, dividends, and other income. Obviously the cost basis of your XRP purchase price changes things. 

If you had ur XRP in an 'interest' bearing place like Nexo, Crypto.com, Bitrue, etc., then you have to remember: It ain't "interest". The IRS says crypto is property. When someone gives you money to use your property, it's called rent. Rental income is very different than interest income in that rental income expenses are deductible. That's a hole other fun avenue :-) Point is, that 'rental' income cuts into your allowable "free" capital gains too. 

...

For most people, the key numbers are their income less $80K...and to max out IRA & HSA.

If you're well below these numbers, don't worry about your gains. 

If you're above them, then you should of done the math before Dec 31 to maximize your capital gains with minimal tax. If you didn't do the math then, then you know to do so in Dec 2021 ;-) ... Trust me, I conduct a lot of transactions on Dec 31 and Jan 1 ...silly what a difference an hour can make. 

As to state tax .... it varies. For example, there are no federal taxes at all in Puerto Rico cuz it's only a territory....AND PR doesn't have capital gains as part of its income tax, . but there are some hoops to jump through that you might find onerous 

If you're a whale, I'd  recommend looking into a golden visa and Portugal. No cap tax there on crypto at all. Cheaper than Switzerland...sunnier too. Consider the Azores. 

 

Hope something in all that is of value .. 

 

 

 

 

  

 

 

 

 

 

That helps a lot man, thanks. Even accountants here from PR had no clue when I asked them about taxes from crypto proceedings. I got different answers from different people. I like your answer the best 😂 I’ll stick to that one as it benefits me the most and you sound well informed. 

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8 hours ago, NightJanitor said:

In the US, has anyone yet figured out a way to custody within a Roth IRA or a 401k?

I'm not 100% sure what you mean.  

But, an IRA can be managed in one of 3 ways:

1. Managed IRA ... where you pick your level of risk and someone invests your money into a fund deemed at that level. 

2. Self Directed ... where you pick your own stocks and funds to invest in

3. Self Directed with Checkbook Privileges ... where you invest your own IRA money into whatever you wish ... crypto, neighbor's lemonade stand, grandmother's startup, whatever. (There are limits though....and it requires a custodian's oversight to make sure u adhere to those limits....i.e. u can't invest in your own startup ... Cheapest overseer I've found is about $1K) 

All 3 can get you to crypto in some form now days.

I apologize in advance if I missed the mark on your question ...

 

Edited by RobertHarpool
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