If you sold bitcoins or used crypto to buy anything, you owe the IRS taxes.
The U.S. government caught up with the times and decided bitcoin is property. That means any purchase you make with bitcoin has to be reported on your taxes. In fact, in almost every country now you are liable to pay taxes on profits acquired from cryptocurrency like bitcoin.
In this article, we’ll give you a few tips on cashing out bitcoin without getting crushed by taxes.
4 Tips on Cashing Out Bitcoin
Though the government now requires you to pay taxes on your bitcoin, there are ways to avoid taxes. Or at least lessen their impact.
Our tips are:
1. Cryptocurrency Tax Software
If it’s too late and you already know you have to pay taxes, check out a refund-maximizing cryptocurrency tax software.
This specialized tax software will maximize your profits and find ways to save you money that you never even thought of. They are well worth the profit considering they can potentially save you hundreds of dollars.
2. Tax-Free Gold
Another popular option is to invest in gold that is tax-free.
Precious metal merchants now offer bitcoin investors the ability to exchange your crypto for gold. Or if you would rather, you can invest in an initial currency offering (ICO) that is backed by gold.
3. Individual Retirement Accounts
Purchasing an Individual Retirement Account (IRA) is an easy way to avoid taxes on your crypto. You’ll have to decide for yourself if you want a traditional IRA or a ROTH IRA.
The key difference between a traditional IRA and a ROTH is taxes.
A traditional IRA has the advantage of your contributions being tax-deductible in the year they are made. For a ROTH IRA, it’s that your withdrawals for retirement are not taxed.
One you save big now, the other you save big later in life.
Many savers prefer a ROTH IRA because your distributions qualify as tax-free. However, the decision will depend upon your own personal, unique wants and needs.
Be sure to also research the varying limits on both. This will help you to decide which IRA is best for you when it comes to saving on taxes.
4. Gift to Charity
If you give your bitcoins to a qualified charity, you can take an income tax deduction for the full market value of the crypto.
For example, if you bought your bitcoins for $100, but then donate to the charity when its worth has risen to $1,000, you will be able to write off the $1,000 as the contribution deduction.
Crypto On and Don’t Fear the Tax Man
As you can see, there are multiple options for you to choose from when it comes to cashing out bitcoin.
If none of these appealed to you and you find yourself amassing a considerable wealth, there’s always moving. It’s an extreme venture to avoid taxes, but there are people who choose to drop their citizenship and move to a tax-free country.
Just keep in mind that even if the country is tax-free now, that is not a guarantee it will always stay that way. Weigh that risk against the loss of your citizenship as an American.
We hope this post helped empower you to find ways to hang onto more of your hard-earned money and invest further into cryptocurrency. Be sure to browse through our other articles on the site to learn everything you need to know about the intersection of technology, business, and marketing.