Home Personal Finance Tax-loss harvesting could make the crypto crash less painful

Tax-loss harvesting could make the crypto crash less painful

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Crypto investors collectively lost trillions —Trillion—From November 2021. If you are one of those unhappy souls, you have a choice. You can run through the streets screaming. You can make a Sam Bankman Fried chew toy and feed it to your dog.Or you can consider tax loss harvestingis a wise strategy to reduce tax liability in the face of economic losses.

This tactic involves selling losing assets (reducing capital gains taxes on winners) and replacing losers to maintain portfolio diversification. As with any crypto conversation, there are some caveats.

  • Your bountiful harvest has its limits. Individual filers generally cannot claim losses in excess of $3,000 annually. However, if in a year he loses more than 3 grands, he can still carry the funds forward to offset future tax obligations.
  • Harvesting isn’t just for the ultra-rich. Alexander Harmsen, Founder and CEO of Portfolio Management Services, said: Global forecast, told Money Scoop. “It is primarily used by wealth managers and their clients. [and] Popular with robo-advisors [but still] You have to give them money to manage. ” In other words, you may benefit from processing your harvest yourself. (Please consult a tax accountant when filing a tax return.)
  • The situation in FTX is very volatile. If cash is stuck in FTX’s swirling tornado of destruction, it may not be harvested until the loss is confirmed. (At the moment all his FTX funds are frozen and the user is completely at a loss.)
  • Please note the wash sale rules. Under this rule, if you sell the same (or substantially similar) asset and buy it back 30 days later, you cannot deduct your losses. This rule does not currently apply to crypto. (The Biden administration Drive crypto regulation However, applying the wash sale rule to digital assets has not gone far.) Still, crypto regulation is evolving faster than you say.please help me i’m poor

While this strategy may not completely mitigate cryptocurrency losses, it may be the Alocane you need right now. Good Harvest, Pilgrim. 👨‍🌾— Lillian

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