Crypto Investors Can Utilize a Lesser-Known Strategy to Reduce Taxes on Bitcoin Gains

The Strategy of Tax-Gain Harvesting

Amid the rising value of bitcoin, crypto investors may face increased tax implications. However, experts recommend a lesser-known strategy to lessen future tax burdens for individuals in the 0% capital gains bracket.

Understanding the 0% Capital Gains Bracket

Tax-gain harvesting involves selling profitable crypto during a lower-income year to take advantage of the 0% long-term capital gains rate. This means that investors won’t be required to pay taxes on their gains if their earnings fall below a specific threshold. The 0% bracket is applicable to assets held for more than one year.

Income Threshold for the 0% Capital Gains Rate

Many may be surprised to learn that the income limits for qualifying for the 0% capital gains rate are higher than expected. For the year 2024, individuals with taxable incomes of $47,025 or less for single filers, and $94,050 or less for married couples filing jointly, can benefit from this rate. These thresholds are even higher for the year 2025.

Utilizing the 0% Bracket to Reset Basis

In addition to reducing tax liabilities, investors can also use the 0% capital gains bracket to reset the basis of their crypto assets. By selling profitable crypto without triggering taxes and repurchasing the same asset, investors can maintain their exposure while staying within the 0% bracket. It is recommended to conduct a tax projection to assess the impact of increased income on other financial aspects.

Market Outlook for Bitcoin

On November 18, the price of bitcoin was around $90,000, marking a significant increase from the start of the year. While the future prices of bitcoin are uncertain, some investors anticipate positive developments under the incoming administration, promising favorable policies towards cryptocurrencies.