If you are, like many people around the world, drawn to the exciting opportunities to make money that are available with this new asset class called cryptocurrency, then you will need to find ways to optimize your investments and trading as much as possible. One of the best ways to do this is to learn some smart and convenient legal ways to avoid paying taxes on cryptocurrency. Here are some legal ways in which you can avoid paying taxes on cryptocurrency:
Hold Onto Your Cryptocurrencies as a Long Term Investment
One of the best legal ways to avoid paying burdensome taxes on your cryptocurrencies is to just hold onto your cryptocurrency investments. You will not be required to pay any taxes on such cryptocurrencies unless you decide to sell. You may choose not to sell it and simply treat it as a generational wealth-building tool.
You can consider holding onto the cryptocurrency for a few years and then selling it at the right time. It is vital to choose the right time to sell as it can help you avoid paying high tax rates on long-term capital gains. You can consider selling your cryptocurrencies during a low-income year as it will help you save money.
Gift It to Others
This is another excellent legal way to avoid paying taxes on your cryptocurrencies. You can choose some of your close friends to gift the cryptocurrencies. The best part is that the gift recipients will not be required to pay any gift tax either.
Consider Moving to Puerto Rico
If you are a very serious cryptocurrency investor with a full-time gig, you can consider taking up this step. Moving to Puerto Rico is an excellent way to avoid paying U.S. Federal Income Tax. Puerto Rico is well known for its generous tax benefits. However, keep in mind that you will have to meet some requirements, such as becoming a bona fide Puerto Rico resident along with maintaining residency.
You Can Buy Crypto in an IRA
This has to be one of the smartest options available. It is perfect for those who want to build their wealth for life after retirement. There are many IRAs that will give you the opportunity to have a diverse portfolio of stocks, mutual funds, and exchange-traded funds.
Make sure that you choose self-directed IRAs, as they will give you the opportunities to invest in cryptocurrencies. Before you go ahead with this step, make sure that you understand the entire process and preferably talk to an expert about it.
To Sum Up
It is vital to have clarity on the tax rules and implications when you start investing in cryptocurrencies. Understanding cryptocurrency taxation is no easy task. Hence, as aforementioned, it is advisable to speak to an expert, such as a Certified Public Accountant (CPA). You will receive some excellent suggestions on how to minimize your cryptocurrency taxes.