don't apply, meaning that you can sell your bitcoin and buy it right back, whereas with a stock, you would have to wait 30 days to buy it back.For one, it paves the way for"One thing savvy investors do is sell at a loss and buy back bitcoin at a lower price," explained Shehan Chandrasekera, a CPA and head of tax strategy at crypto tax software company CoinTracker.io. "You want to look as poor as possible.
"I see people doing this every month, every week, every quarter, depending on their sophistication," he said. "You can collect so many of these losses."When an individual goes to liquidate their crypto stake, they can use these collected losses to bring down what they owe to the IRS through the capital gains tax.
Quickly buying back the cryptos is another key part of the equation. If timed correctly, buying the dip enables investors to catch the ride back up, if the price of the digital coin rebounds. So let's say a taxpayer purchases one bitcoin for $10,000 and sells it for $50,000. This individual would face $40,000 of taxable capital gains. But if this same taxpayer had previously harvested $40,000 worth of losses on earlier crypto transactions, they'd be able to offset the tax they owe.But he cautioned that thorough bookkeeping is essential.
"Without detailed records of your transaction and cost basis, you cannot substantiate your calculations to the IRS," he warned.
You sell, you have to pay taxes on it.
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