Maximize Tax Savings with Strategic Selling of Profitable Cryptocurrency
As the end of the year approaches, it’s essential to consider probable tax savings opportunities for certain digital currency investors. The cryptocurrency industry experienced whole lot of losses in 2022, amounting to nearly $1.4 trillion. Numerous investors utilized tax loss harvesting to offset profits with losses. Nonetheless, with the rally in 2023, you should consider a different approach known as “tax gain harvesting,” which involves strategically selling profitable cryptocurrency held in brokerage accounts.
This strategy is especially beneficial for investors in the 0% long-term financial resources gains bracket who have owned digital assets for more than one year. Certified public accountant Tom Wheelwright, CEO of WealthAbility, recommends this approach for maximizing tax savings.
Understanding Your Financial resources Gains Bracket
To benefit from tax gain harvesting in 2023, it’s critical to comprehend your financial resources gains bracket. Single filers with taxable income of $44,625 or less and married couples filing jointly with a taxable income of $89,250 or less fall into the 0% long-term financial resources gains rate.
Keep in mind that “taxable income” is different from gross earnings. It is calculated by deducting standard or itemized deductions from your adjusted gross income. For instance, if your pre-tax 401(k) contributions reduce your taxable income below the threshold, you may qualify for the 0% long-term financial resources gains rate.
Looking ahead to 2024, the 0% long-term financial resources gains brackets are substantially greater, with taxable income of $47,025 or less for single filers and $94,050 or less for married couples filing jointly.
Hot Take: Seize the Opportunity for Tax Savings in 2023
As we approach the end of the year, it’s critical to consider tax gain harvesting as a way to maximize tax savings on profitable digital currency. By understanding your financial resources gains bracket and implementing strategic selling, you can benefit from the 0% long-term financial resources gains rate and minimize your tax liabilities.
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