The US tax agency, the Internal Revenue Service (IRS), and cryptocurrency traders agree on one thing: taxation on cryptocurrency, or virtual currency as a whole, is still in the gray area despite having issued guidance and revisions.
Cryptocurrency is treated by the IRS as “property” and not as stock or bond or commodity. Being so, cryptos are subject to taxes on capital gains, capital loss, or ordinary income after buying, or selling, or swapping cryptos, or any other crypto activity.
With knowing each and every activity with crypto and the correct road to take towards an accurate tax reporting, many crypto traders and tax specialists have noticed with interest some loopholes in the taxation of cryptocurrency that everybody concerned should know about.
Loophole No. 1
The Pareto Network. A platform of investment with research that offers a subscription package presented primarily to premium investors who are screened for qualification. If qualified, they are given a specific score and they can build their score by purchasing Pareto tokens.
The information obtained from Pareto by the subscriber are critical data about the cryptocurrency marketplace which would tell of the leading cryptos in the market, among the many data and tools that an investor would need to format a strategy and allocate capital investment.
The tokens bought by the subscriber, by the way, have a market value and, at various markets, can also be traded. The best thing about this tokens is that these qualify under IRS guidelines as capital losses.
Loophole # 2
Be a bona-fide Puerto Rican resident and enjoy 0% capital gains tax on your cryptocurrencies until the first day of 2036. You would have to cut off all connections you have on the USA like closing all bank accounts, sell your cars, sell your house, cut your cellphone service and the cable.
Exclude your cryptos from cutting off, however, if they have been with you for some meaningful time already, though you would still have to pay US taxes for that even if you are in Puerto Rico by then. Worry not since there are ways to mitigate the US tax burden.
Talk to a crypto professional about your high value cryptos if you are not that savvy yet. There are techniques to rid yourself of those US taxes once you are in Puerto Rico and enjoy the sun, the sand, and the sea while your cryptos get fatter and fatter with no more taxers to pay.
Loophole # 3
Wash Sale. This ruling is intended for stocks and securities and not for cryptocurrency. This is intended to keep investors from claiming capital loss when they sell their stocks at a time of depreciation from what they originally had bought the price.
When depreciation of price happens with cryptos and the investors decides to sell their crypto despite the loss, they can claim capital loss on their tax and can have the chance to get back to their original position.
The complications of filing your tax return by yourself and if you are a crypto trader will compound even more. it is better to hand everything over to Tax Slayer. They are professionals and they have been around for some time. Relax and savor your success instead.