Crypto Tax Concepts

How the holding period and timing affect tax on a crypto sale.

• •Hold assets for more than one year to qualify for long-term capital gains rates
• •Use tax-loss harvesting to offset gains with losses
• •Consider donating appreciated crypto to charity for tax deductions
• •Check the current wash-sale rules before repurchasing an asset you sold at a loss

Moving income or assets to family members in lower tax brackets.

• •Gifts within the annual gift-tax exclusion (counted per recipient) are excluded from gift tax
• •Use GRATs (Grantor Retained Annuity Trusts) for estate planning
• •Implement family limited partnerships for business interests
• •The kiddie tax can tax a child's investment income at the parent's rate

Borrowing against appreciated assets instead of selling them, and the step-up in basis at death.

• •Buy an appreciating asset (stocks, real estate, Bitcoin, etc.)
• •Borrow against it instead of selling, so no gain is realized
• •If a lender liquidates your collateral, that sale can realize the gain
• •Heirs generally receive a step-up in basis to the value at death
• •Estate tax can still apply to large estates

Donate appreciated assets to a trust that pays you income for life or a set term, then passes the remainder to charity.

• •Donate appreciated assets to a CRT
• •Receive an income-tax deduction for the present value of the charity's share
• •Receive payments for life or for a term of up to 20 years
• •The trust can sell the asset without paying capital gains tax at that point; payments to you are taxed as you receive them
• •What remains in the trust passes to charity at the end of the term

Defer gain on investment real estate by exchanging it for similar real estate. Not available for crypto.

• •Since 2018, like-kind exchanges apply only to real property, so crypto does not qualify
• •Use a qualified intermediary to hold the sale proceeds
• •Identify the replacement property within 45 days of the sale
• •Close on the replacement property within 180 days of the sale
• •Defers capital gains taxes until the replacement property is sold

IRS IR-2018-227 (2018-11-19): like-kind exchanges limited to real property

Investing capital gains in a Qualified Opportunity Fund to defer them.

• •Identify qualified Opportunity Zones
• •Invest capital gains in a Qualified Opportunity Fund
• •Rules changed (as of 2026-10-10): the original 10% and 15% basis increases required holding the investment 5 or 7 years by 2026-12-31, so new investors cannot get them, and the IRS issued new Opportunity Zone guidance in 2026. See IRS guidance before acting.

IRS: Opportunity zones (checked 2026-10-10)

Converting traditional IRA funds to a Roth IRA during low-income years.

• •Identify low-income years for conversion
• •Convert traditional IRA to Roth IRA
• •Pay taxes on converted amount in low-income year
• •Each conversion has its own 5-year period before it can be withdrawn penalty-free before age 59½
• •Earnings are tax-free after age 59½ once the Roth is at least 5 years old

How LLCs, S-Corps and other entities change the tax treatment of business income.

• •Form appropriate business entities
• •Choose optimal tax classification
• •Structure income distribution for tax efficiency
• •Take advantage of business expense deductions
• •Consider self-employment tax savings

Coordinate major financial events with overall tax situation for maximum benefit.

• •Time asset sales for optimal tax years
• •Coordinate with income fluctuations
• •Plan Roth conversions during low-income years
• •Strategically time charitable donations
• •Consider state tax implications of timing

Use permanent life insurance policies as tax-advantaged investment vehicles.

• •Purchase permanent life insurance policies
• •Build cash value through premium payments
• •Access funds through policy loans
• •Receive tax-free death benefits
• •Utilize tax-deferred growth potential

Spread out capital gains recognition over multiple years by structuring sales with deferred payments.

• •Structure sale with deferred payments
• •Recognize gains as payments are received
• •Benefit from potentially lower tax rates over time
• •Maintain cash flow while deferring taxes
• •Consider interest implications of installment sales

Offsetting gains with losses from other investments.

• •Identify losing positions in investment portfolio
• •Sell losing positions to realize losses
• •Offset capital gains with realized losses
• •Check the current wash-sale rules before repurchasing
• •Carry forward unused losses to future years

Use Health Savings Accounts for triple tax advantages in healthcare planning.

• •Maximize annual HSA contributions
• •Invest HSA funds for long-term growth
• •Use HSA for qualified medical expenses
• •Benefit from tax-deductible contributions
• •Enjoy tax-free growth and withdrawals