How To Save $$$ On Your CRYPTO TAXES! (Crypto Tax Loss Harvesting)



raided and invested early this year I know I did a little bit and so today I'm here with Zach from token tax and he has some expertise in the space and can share with us potentially some interesting ways in useful ways to save some money this year so hello Zach if you can give us a quick intro about yourself about token tax and then we can dive into the nitty-gritty details everyone nice to meet you I'll keep this intro quick so we can get to what you all really want to hear but my background is in finance and accounting where I studying way back in undergrad and then I tried all the different paths Investment Banking Teach for America consulting impact investing where we were investing in companies that did good and made money and that's where I first discovered the crypto space about five or six years ago and from there I wanted to find a way to get involved but I wasn't a software engineer I wasn't computer science background but all the sudden crypto taxes became very important and I was helping a few wealthy people figure out hey how can I keep where my money how can I offset losses in other areas or how can I manage my taxes and I realized hey this is why I didn't get into taxes in the first place it's just helping really rich people save a little bit more of their money I want to democratize the knowledge of these tools though and when I met my partner Alex who is a software engineer in computer design background we created token decks which some of you might be familiar with but basically it's made to be the easiest way to file your crypto taxes so you just take all your transactions upload them the system sorts out the messy data and this and I use download your tax forms and a lot of people used our system last year and now we have a new product the tax loss harvesting that Kevin has asked me to speak about today though you know let me jump right into it so axe loss harvesting let me share my screen so a lot of you guys a lot of us investors bought all coins that go in here um even in December January and February at prices above what it trades at today so that's bad fortunately but a silver lining is that there's a chance now to sell any asset that we bought at a higher price than what it's worth in that the harvest the losses in other words you have to realize the loss before it blocks your taxes I bought one Bitcoin for $10,000 in January and I just hold it until the end of the year I don't get any tax savings from that I'm just sitting on an unrealized loss I have to actually sell that Bitcoin and then if I still want to hold it I can buy it back but if I don't sell it before the end of the year there's no realizing the loss it won't block games on my taxes or block my other income which is great even if you don't have any games in crypto or stocks or anything if you made money at another job you can block income from that and these tax losses never expire hang on one second so what is a tax loss harvesting it's a legal way to minimize taxes toward the end of the year so anyone who has a lot of money and has a private and worth individual or private wealth manager this is what private wealth managers do they look at someone's tax locks and they say alright we bought Google we bought a Tesla about Facebook we bought SP Y which of those do we hold it a loss so that we can sell them this year before the end of the year realize those losses and then buy them back Oh with stocks you have to wait 30 days because they have wash sale rules it's not clear that's the case in crypto but there are two ways around it one you can assume it doesn't apply to crypto – you can buy a correlated asset like if you sell euros you can buy aetherium because those two trade very similarly and most crypto is quite correlated so if you sold your aetherium or any other crypto or for Bitcoin even there's still 90% of the explode that's a little more complicated so here's what I plan to address and please feel free to pause or ask questions or raise hand raise your hand and Kevin will flag me but one do wash sale rules apply it as I just mentioned we'll talk about that – what if I don't have games to offset as I quickly mentioned still you want to harvest your losses when you can because if prices come back it'll be too late prices come back and you still own your crypto but at a lower basis that's great you have the exact same amount of assets plus this tax loss that you can get before the end of the year 3 something that might be of interest to a lot of people is trader status which basically means that you traded enough and it's pretty subjective well you can talk to a CPA about it but if you treat it enough let's say you have $50,000 in losses of crypto and you made $80,000 on a lawyer or doing any other job you can actually offset your income in your regular job on a w-2 whatever with all of your crypto losses that's just $3,000 the special status but it's actually not that hard to qualify for it if anyone has more questions we can follow up afterward so let me show you a quick example all right so we have a client is sarah 35 year old single female in california he made $100,000 in short-term games he bought a bunch of aetherium last summer of 2017 sold it in January made $100,000 only held it for six months so she's in California so she's getting taxed at 45% now that means she owes $45,000 just for this crypto but what if she sold that aetherium to buy all coins now those all coins she bought for $100,000 might be worth 5,000 or 10,000 it's a really big it's a really big tax bill to pay what if she sold that hundred thousand dollars of eath for Bitcoin well let's take a look though she's looking at all of her holding us all of her tax holdings and she's got seven Bitcoin and on the whole day right now she sold all of them she'd get a $10,000 realized box so she bought between many different times of the past two three years trading in and out and it's pretty complicated all she knows now is hey I have seven in this wallet and in total those seven are worth $23,000 and I paid thirty three thousand for it that's all she knows but if you double-click in you can actually get a lot more value out of your holdings let's take a look so seven Bitcoin at the tax lot level look at the bottom where every single chunk of Bitcoin you bought it sold as a u.s. dollar equivalent so how many Bitcoin should Pam actually sell to minimize her taxes so like I said she has seven Bitcoin but taking a closer look for point two of those Bitcoin were bought at prices higher than today's price let's say thirty five hundred two point eight of them were actually bought a long time ago at really low prices or maybe even last week in a slightly lower price but if she looks at a tax lot level she can actually see all right of my seven Bitcoin I should sell for point two of them not all of them okay that's the key thing here so four point two of them realizes seventy thousand dollar loss now all the sudden your taxes are gonna drop a lot so originally I showed you she had a hundred thousand dollar capital gain now she sells these 4.2 bitcoins sells them four dollars or aetherium anything she wants by the Bitcoin back but now her capital gain has been reduced from a hundred thousand down to thirty thousand okay so let's take a look her tax liability goes from forty five thousand the thirteen thousand five hundred so I know that's a lot of numbers for everyone but let me just put it another way from selling specifically those exact four point to Bitcoin she now saved herself $31,500 straight in her pocket that she no longer owes the IRS so any of you guys have any games or any regular income outside of crypto this is exactly what will happen to you if you harvest these losses so if you just bought crypto really high prices and held on to it not going to do you any good unless you realize those losses so unfortunately that has to be done to me for that end of the year and that's why Kevin and I decided to do this presentation right now while you still have a couple of weeks to do it so let me pause there are there any questions or anyone confused Evan how is that – that makes sense or um that didn't make sense we have about 20 people watching a lot of people saying hi but no exact questions as a rail okay yeah if anyone has questions but otherwise I'll just keep cruising through and hopefully this will be useful so gonna pop stop me whenever you want so no a lot of people use portfolio trackers and so like I said oh I have 9 Bitcoin I have 30 etherium and this is how much they're worth but you really need to look in Excel or you need to have some service some product to see up a tax lot level and so no tax loss harvesting dashboard let me actually just you can show you a quick demo how this works but basically can you see the dashboard Kevin yes I can okay so basically all of us hold a mix of coins right and so let's see for me I have you know for this for this dummy data 508th are held at a loss of 160,000 whereas 1565 eat are held at a gain of 130,000 you might ask how is that possible well you know it means these older eath were bought way back at the beginning of 2017 whereas these new eaves were probably bought at the end of 2017 or early 2018 and so the key thing is you want to you want your gains and losses bifurcated into two ez2c groups and so this is exactly what our tool I know some of you guys are already talking text users but you can see this on your account where it basically shows you exactly how many of each crypto you own you can sell and how big the loss will be so maybe it doesn't make sense to sell your eat to save $3 but maybe it makes sense to sell your EOS to save 39,000 on your game and the other piece here is a lot of people might own crypto that's not liquid anymore but they don't think it's it's worth it it's not actually a worthless security the project is still active there's nowhere to sell it so there's an organization called DOS ins that we've been working with that basically you can sell it to them there they are gonna use some of the proceeds to fund financial literacy and education initiatives but basically you sell it to them for zero you get the tax loss so right you know you're probably blocking 40% of the bet so if you bought it for 30,000 you sell it to them for zero you probably reduce your taxes by $12,000 because no it's basically your tax rate times your own realized loss that you realize sorry for all the technical accounting terms I feel free to stop me Kevin if it sounds too technical let me switch back to some Jefe cues though um it's it's okay but you will give us the links later to dose ins and everything else you mentioned okay sounds good if you hiii-yah if you have crypto like that to sell a video link doesn't so jumping into the questions we get all the time what is a wash sale so I'm trading stocks and I have Google shares and Google's Garn down quite a bit the last few months let's say I bought some three months ago now I sell it and I get I had five thousand dollars worth the Google now it's worth four thousand I sell it I get $1,000 loss I immediately buy it back because it's a security the IRS says that loss is disallowed all the watch sale as if it never happened so a lot of CPAs and a lot of tax preparers in the crypto space are debating about this as most of you probably know the IRS hasn't said anything about crypto axes since 2014 when they said hey you have to pay taxes on all your crypto transactions it's not a currency there's no exclusions for really small purchases or really small if you bought a coffee you still have to report it and since then all they've ever said is report your transactions and pay your taxes they haven't specified as it as security is it so there's a big debate to wash sale rules apply so for us we kind of like to give you all the facts and let you make your own decision but me if I had a big loss to harvest what I would do now if you talk to us we can explain which cryptocurrencies are correlated with others or you can google it it's publicly available but you sell a crypto currency that you own that you want to still hold on to you buy another one for that 30-day window that you know is very similar to it so if you own the chain a Chinese cryptocurrency you could sell it and buy Nia or an shares or you know there are a lot of crypto currencies that are almost 100% perfectly correlated so owning one is almost the same as only another lumens and ripple so you know you can roll the dice and just sell your crypto realize the loss and buy it back probably because it's property the IRS won't do anything but you know in my opinion when you can be better safe than sorry and so you'll probably hear a mix if you've watched these webinars before and reading about it some people say they don't you don't apply it also sell away and buy back immediately and I just like to show you a little more nuance to that statement explain why we see what we say and you know you can make the decision that makes that works for you you know suffice to say selling it and buying back at least giving yourself the chance of the tax loss is probably better than not doing anything or in fact other than the transaction fee of 0.2% or whatever pretty much a pretty lunch sack a question from the audience yeah I think I know the answer for this but I'll let you answer it anyways as being the tax expert um Pao asks even if I don't cash off from coinbase do I still have to pay taxes yeah you know we you know Kevin we can make a more basic crypto tax 101 but basically I could jump to a slide but basically long story short Cal every time you traded crypto every time you've sold crypto for anything including dollars or other crypto or to buy something online or whatever you have to report it to the IRS if you didn't take any money out of coinage that's totally irrelevant if you ever sold crypto or anything else like if you bought Bitcoin or aetherium on Quimby's transferred it to finance and used it to buy other crypto that's a taxable event when you sold it on buy next if you flop it coin and then sold it a little bit and baht a little more on coin basis sold it never took any money out you still have to report all of those sales so whether you took money out or not it's a really common misconception that has nothing to do with the crypto and you know to be honest this is a taking a step back this is something that IRS were publicly asking them to think about crypto should arguably be a totally new asset class and Queen desk published an article from us on tax day last year April 17th laying out why and there are a number of reasons but for right now what they're saying is that this is like any other property any other stock or any other security when you n ever you sell it you have to report it to us in the US dollar terms so if you went to finance and trade Bitcoin for us you have to report it to them in the US dollar value and that's why you know software like token tax so useful because we have that pricing database you just upload your finance trades we know that US dollar equivalent of every crypto and every minute and we say Aria this is the u.s. dollar equivalent here's the forms for the IRS hopefully that that answers your question but yeah it's unfortunate because it's so cumbersome and so difficult to report without the software you know back before we existed it you know two years ago people are just on Excel lining things up looking up prices manually it was really a disaster even for people that really wanted to pay their taxes so let's jump ahead another one so capital loss carryforwards an offset of ordinary income a lot of people say hey I don't have any games all I've done is lost money Wow tax loss harvesting is useless for me right the answer is definitely not it's very useful anyway you want to realize as many losses as you can whenever you can because the thing is prices hopefully will come back and even if they don't you know you're giving yourself the chance in 2018 realizing that loss to block taxes in 2018 there's what happen to a lot of people last year 2017 they made so much money they started with ten thousand turned it into a million they're trading in and out trading it out and but at the end of the year they didn't think about taxes so a million dollar game they finished the year with a million dollar game didn't harvest losses now I can't go back in time and carry losses back so they owe the IRS five hundred thousand dollars just in texts and if they bought all coins or even aetherium in December now that's dropping dropping dropping they've lost you know they could have lost all million of the dollars they still owe the IRS five hundred case so we have a lot of people who are upside down and actually owe the IRS more than their crypto today is even work and if they had done more tax planning and thought more consciously about paid the IRS does it arbitrarily on a calendar year let me be thoughtful about when I'm buying and selling to try to manage my taxes you know a lot of you guys probably realize if you ever looked at one of those tools and you just held Bitcoin because of the taxes you basically had to do twice as good by selling it for other crypto as you would have just to break even if all of your purchases had to go up twice as much because of the tax consequences as if you just held the Bitcoin in Imperium so what Warren Buffett and a lot of famous investors say is buy invest passively and hold and so you know cryptocurrency moves very quickly but a lot of those adages are still true buying and holding buying bitcoins areum with with money on kawin base with the US dollars on coin base and holding those are the people who have actually done the best over the past two years interesting and unless you're a really good trader your time to market that being said it's not the same as stocks and there is a lot of opportunity to trade more and be more active but you need to be aware of the taxes and basically harvesting all the losses you can make sense you carry them forward forever they'll block your income every year until they're used up or you can try to qualify for trader status and use them all up in one year so let's take a look at trader status because I think this is going to be really interesting for a lot of us who maybe lost a big chunk of money compared to how much we make every year so if as I mentioned the Kevin you have your regular job totally unrelated at crypto you you might be a driver for a company whatever made 50k doing that you lost thirty thousand trading and crypto if you were trading enough and each day and not even every day of the year but even just in certain windows just in january/february you're making trades throughout the day to try to catch price swings you'd probably qualify for trader status and all of your losses I'll set your current income so if you have a 50k income you might owe the IRS 15-20 K you can reduce your taxable gain all the way down to 20k and then you're only going to pay them a couple of thousand in taxes so you can probably see how quickly this pays for itself are there any other questions Kevin um just one more general one for you and yes I think we can come up with some more general content – for another webinar because this is specific to tax loss harvesting but Charles asks can you talk about if fees from transactions on exchanges are those tax deductible hey Charles so yeah all of your fees are tax deductible you know at the end of the day you need to tell the IRS the economic reality of what happened in you paid $10,000 or 10 Bitcoin but really they charged you $100 fee so you actually paid ten thousand one hundred for ten Bitcoin and it used to be captured somewhere so the way that our system does it it either increases the cost basis you'll have a bigger loss or whatever or it decreases the proceeds as in it decreases the US dollars you got when you made a trade either one way or the other may we make sure that you don't basically pay taxes on on money you never make because of the feet but that is something that that other platforms don't factor in because it's kind of complicated you have to convert if you trade on by names to coin you have to convert those fees to dollars and then deduct it from the basis so yeah our software does that automatically but if you're trying to do this on your own you can do it you just need to think about it as exactly as a reduction and the money you've got that's the way to do it it is like a tax deduction now as far as aggregating it into one thing in-state yeah I paid ten thousand and fees that that's harder to do because you can do it but your if you can talk to your CPA about it but it's going to be more complicated because it will kind of be in different parts of your tax returns so a much better solution is baking in those those fees into every transaction on your gain loss report on your 8949 but you guys have probably seen yes it's a bunch of hey what's the ass that you sold date acquired sorry it's hard to see tape sold proceeds cost basis gain loss you guys have probably seen form 8949 err maybe you've heard about it from your accountant normally if you own stocks the brokerage will give you what's called a 1099 then you just import into your tax software or give to your accountant unfortunately and the crypto exchanges don't do that that's why we make these for you but yeah hopefully that answers your question and don't don't sleep on that I mean I've seen especially people on G Dax do a lot of market buys those fees add up so fast when you're talking about thousands of dollars half a percent every time and I've seen people who especially if you had a recurring buy on coinbase for example here's something crazy that I've seen a lot people would do a recurring buy every day on coinbase for a dollar witnessed has a minimum fee of $1 so every day two dollars would leave your checking account you'd only get one dollar with a Bitcoin Bitcoin went up so much that people still were like wow I made so much money but if you look at it if had they not charge those fees literally would have had twice as much money and it's and they don't tell you that I mean it's I mean I don't want to say yeah it's it's a it's frustrating and I might even say they're a little bit predatory because you know why are people getting charged a one dollar fee for a one dollar recurring transaction so be very aware of your fees especially if you're buying in small chunks on basic G X so just taking a look I'll just to talk a minute about token tax platform those of you who aren't familiar we support every crypto exchange if you bought icos or did manual transactions we have a way to put that in as well create all your forums we create F bars if you have traded on Finance Kukui topia it makes any for any foreign crypto exchange you may need to file what's called an F bar which is if you had more than ten thousand dollars on that platform ten thousand dollars worth of crypto at any time on that platform you're supposed to send financial crimes enforcement network it's like an offshoot from the IRS that enforces crimes a notification saying hey my max value on Finance in 2017 was eighteen thousand dollars so it's not clear if this applies to crypto again because we can't get any clarification from the IRS but Paul Manafort Donald Trump's old campaign adviser this is what he was actually found guilty yet it was he was being paid in funds by Ukraine or whatever putting it in a bank account and he didn't disclose it to the IRS but when that happened and he was convicted and given ten years in prison or whatever it was a lot of customers started asking us for the ability of making these forms and basically what it is just tells you the exact US dollar value you have on every single exchange for every day of the year and then we give you the instructions to file the form again it's kind of a better safe than sorry situation will the IRS care if you had twenty thousand dollars on Finance I don't know I hope that they would be they would be thoughtful that why would anyone know about that if they're just an ordinary crypto investor and Iran before an acid in their life but that's why we offer this and sort of try to make it as easy as possible yeah we have a few thousand users already no matter what exchange you're on we support ya API and or CSV Kevin anything else do you think the group would want to know about tax loss harvesting um no I think that was really helpful I even personally learned something new about the trader status I didn't know before so yeah thank you for status could be really like a get-out-of-jail-free card for a lot of people who I don't love you with the timing on there and so you know Kevin has I'll send you the link yeah you can reach dosimeter us as well there I don't I don't know I'll reach out and see if they have director website now ah good yeah I think that's really helpful um everyone thanks for watching we had roughly 30 people on at the peak during this webinar that's really interesting because usually people don't hop on during this bear market time but that's that's awesome this is an interesting topic and timely one too thanks Zach for joining us I'll leave the links below on how to reach them yeah yeah or you can share my share email as well which I might email people one of the grab time and connect them along my team okay sounds good thanks everyone

8 thoughts on “How To Save $$$ On Your CRYPTO TAXES! (Crypto Tax Loss Harvesting)”

  1. would love more info on Dosen. Not sure if i'm spelling that right but I can't find anything on them.

  2. Thank you for all this info.

    I am a member of a multi member LLC that had some rather large losses. Is there a limit for what can be written off for 2018 per member? Is the $3000 limit per person the ceiling for us, or should we be able to write off everything if we realize the losses before the end of the year. Thank you for your time and knowledge!

  3. Wow – way different information from anything else I've heard 🤔👍❤️ cyberhugsnstuff 🤗

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