2024 End-of-Year Strategies for Crypto Investors

The cryptocurrency market in 2024 has been a rollercoaster for investors, with Bitcoin and other digital assets reaching unprecedented highs. While these gains are exciting, they can also lead to substantial tax obligations. To minimize your tax burden and optimize your financial strategy, here are top 5 effective year-end approaches to consider.

1. Offset Gains with Loss Harvesting

If you’ve experienced losses in your portfolio this year, you can offset them against your taxable gains—a process known as tax-loss harvesting. By selling underperforming assets, you can reduce your net capital gains and potentially lower your tax liability. Remember, up to $3,000 in net losses can also offset your ordinary income, with additional losses carried forward to future years.

2. Donate Cryptocurrency to Charity

Donating crypto to a charitable organization is a win-win strategy. Not only do you support a cause you care about, but you also avoid paying capital gains taxes on the donated amount. Additionally, you may qualify for a charitable deduction based on the fair market value of the crypto, provided you’ve held it for over a year.

Let Say;

John purchased 50 shares of Company XYZ stock for $10,000 three years ago. On December 15, 2024, he donates the shares to a local animal shelter. On that date, the fair market value of the shares is $25,000. John receives a $25,000 charitable deduction, which he can fully deduct from his $150,000 adjusted gross income (AGI).  

• The $25,000 deduction saves John $6,250 in income tax at his 25% marginal tax rate.  

• The donation allows John to pay zero taxes on the $15,000 capital gain ($25,000 - $10,000)

3. Share the Wealth: Gift Cryptocurrency

You can gift cryptocurrency to family members or friends without incurring a tax liability, provided the value stays within the annual exclusion limit ($17,000 per recipient for 2024). For recipients in lower tax brackets, this strategy can reduce their tax liability when they eventually sell the gifted crypto.

4. Boost Your Savings with a Crypto IRA

Consider opening a self-directed Individual Retirement Account (IRA) that includes cryptocurrency investments. Contributions to a traditional IRA may reduce your taxable income, while Roth IRA contributions grow tax-free. A crypto IRA allows you to invest in digital assets while leveraging the tax advantages of these retirement accounts.

5. Reassess Your Tax Basis

If your income is expected to rise in 2025, you might benefit from resetting your tax basis through tax-gain harvesting. This involves selling your crypto to lock in gains and then repurchasing the asset at the current market price. The higher basis can reduce taxable gains in the future if the asset appreciates further.

Key Takeaways for Crypto Tax Planning

• Plan Ahead - Evaluate your portfolio and decide which strategies best align with your financial goals.

• Understand Holding Periods - Long-term capital gains tax rates are generally more favorable than short-term rates.

• Consult a Professional - Tax laws can be complex, especially regarding crypto. Seek advice from a tax professional to ensure compliance and maximize savings.

Contact Mid America Tax Planners Today!

At Mid America Tax Planners, we specialize in helping individuals and businesses create customized strategies to reduce tax liability by up to 50%—and we can help you start seeing results in as little as 30 days!

Get started today by reaching out through our us at Mid America Tax Planners - Contact Us or E-mail us at admin@accounting-usa.com. Let us help you take control of your tax planning before the year ends!