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If Bitcoin Price Drops — an Opportunity for Crypto Tax Planning

Published 11/29/2019, 10:45 PM
Updated 11/30/2019, 12:21 AM
© Reuters. If Bitcoin Price Drops — an Opportunity for Crypto Tax Planning

After many countries around the world such as the United States, the United Kingdom, France, and Portugal published their own cryptocurrency tax guidelines this year, it is only reasonable they will expect to see an increase in crypto tax filing. They may even follow suit with the U.S. Internal Revenue Service and begin their own crypto tax compliance campaign.

As the price of Bitcoin (BTC) jumped this year, so too did the tax liability for every profitable sale, trade or exchange for Bitcoin traders. The recent drop in Bitcoin price presents traders with a great opportunity to reduce tax liabilities accumulated since January 2019.

  • If you have made profits from crypto trading since the beginning of this year, and have some losses now that the price has fallen, you can offset this loss and reduce your tax liability.
  • Some countries, like the U.S., enable you to choose which particular Bitcoin token to sell. Therefore, you can choose to sell the same Bitcoin you purchased when the price was high now at a lower price. This can assist you in optimizing your tax liability. This tax planning method calls for the use of specific identification, a common way to calculate and plan taxes in many countries.
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