This post could potentially save you a lot of money. Don't believe me? There are several stories covering this, including this one: https://www.kiplinger.com/taxes/capital-gains-tax/603753/cryptocurrency-and-the-wash-sale-rule
What is a wash sale?
A wash sale is when you quickly buy and sell a security for the purpose of locking in a paper gain or loss for tax purposes. As far as the IRS is concerned, it is taking the opposite side of a trade within 30 days. There is a financial penalty involved. Some online stock brokerages will even generate warning messages.
Harvest Those Losses Now
The good news is for 2021, this rule only applies to securities. The bad news, they may close this loophole in 2022.
What You Could Do
If you are in overall profit for 2021 and have anything with unrealized losses. Sell them before midnight on 12/31 to harvest the loss. If it's a crypto you want to keep, you can still buy it back right after if you're worried about slippage.
For example, if I am up 100k in profit on crypto, but let's say I bought one Bitcoin at 65k. I can sell that Bitcoin for 50k and take the 15k loss. This lowers my profit on paper to 85k, even though I bought the Bitcoin back for 50k right after selling it. For tax purposes, you booked the loss. This loophole was closed decades ago for stocks, but at least for now it can still be done for crypto. Once such a rule goes into effect, you'd have to wait 30 days before rebuying. And of course in crypto, a lot can happen in 30 days.
Please do your own research and consult with your CPA. Your situation may be unique, so don't act solely on this blog post
Posted Using LeoFinance Beta
Too bad we can't write off impermanent loss on our taxes.
Somebody would have to explain that to the IRS! lol
It good to know there are loop holes we can maximized. I just hope these people don't weary us with policies that looks burdensome. Thanks for this educative content. Will do more research about this subject.
You're welcome. Thanks again for dropping by.
These day „ my coin is loss.
https://invidious.kavin.rocks/watch?v=IS9sxqsozjg&local=true&dark_mode=true
I think you will find that video informative.
I'd link the utub, but I don't want to use utub.
Invidious is an open source anonymizer for utub.
Brave is blocking the javascript for me, too.
This is the extension that does all that for me automatically.
In very useful information, we can make this an experience, have a nice day.