For the 2023 tax year, the capital gains tax rates are 0%, 15%, and 20%. Capital gains tax rates apply if you sell your cryptocurrency after holding it beyond one year and get more than you paid for it. Crypto gains One strategy is to hold onto your cryptocurrency for more than a year before selling it. As mentioned earlier, gains from the sale of cryptocurrency held for over a year are taxed at a lower rate compared to gains from the sale of cryptocurrency held for less than a year. By holding onto your cryptocurrency for the long-term, you can take advantage of the lower tax rate and reduce your tax liability.
It’s worth noting that any losses incurred from trading can be used to offset your capital gains as well as deduct up to $3,000 off your normal income tax depending on how long you’ve held the assets for (see below). Any additional losses can be carried forward to the next tax year. You do, however, have to show a loss across all assets in a particular class to qualify for a capital gains reduction. Crypto tax guide Lisa has over 20 years of experience in tax preparation. Her success is attributed to being able to interpret tax laws and help clients better understand them. She has held positions as a public auditor, controller, and operations manager. Lisa has appeared on the Steve Harvey Show, the Ellen Show, and major news broadcast to break down tax laws and help taxpayers understand what tax laws mean to them. For Lisa, getting timely and accurate information out to taxpayers to help them keep more of their money is paramount. More from Lisa Greene-Lewis