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Crypto investors have lost billions—millions of millions— starting in November 2021. If you’re one of those unfortunate souls, you have a choice. You can run down the street screaming. You can make a Sam Bankman-Fried chew toy and let your dog do it. Or you can consider tax loss harvesting, an effective strategy to reduce your tax liability due to financial losses.
This strategy sells your losing assets (thereby reducing capital gains taxes on the winners), then replaces the losers to keep your portfolio diversified. As with all crypto issues, there are a few caveats:
- There is a limit to the quantity of products. Generally, each filer cannot claim more than $3,000 in losses per year. But if you lose more than three years, you can still carry money to offset future taxes.
- The harvest is not just for the super rich. “Our view is that tax loss harvesting is one of the risk-free strategies that can save you thousands of dollars,” Alexander Harmsen, founder and CEO of portfolio management service Global Predictions, told Money Scoop. . “Most investors and their clients use it [and] it is also very popular with robo-advisors [but still] you have to give them your money to run it.” In other words, you may benefit from handling your own products. (Just ask a tax professional when it’s time to file.)
- The FTX situation is very bleak. If your money is kept in the whirlwind of destruction, you may not be able to reap unless it is confirmed that the money is lost. (At the moment, all FTX coins are frozen, leaving users with nothing.)
- Pay attention to the rules of selling invitations. Under this rule, you cannot deduct a loss if you repurchase the same (or very similar) property 30 days after the sale. The rules do not currently apply to crypto. (The Biden administration has tried to push crypto regulations but has made little progress in getting the rules for the sale of digital assets open.) However, crypto regulations are evolving at a faster pace. than you can say “Help me, I’m poor. “
Although this strategy may not completely minimize your crypto losses, it may be the Alocane you need right now. Pilgrims are happy to harvest. 🚜-Lillian