Wall Street Journal: ‘Selling Bitcoin And Then Repurchasing It Helps You Save On Taxes’

A new article published yesterday on the Wall Street Journal is in today’s Bitcoin news – mostly because of its interesting angle and a piece of advice to investors on how they should sell and then repurchase their Bitcoin (BTC) in order to save on taxes.

In the context of the current bear market, the WSJ article suggests that “the only good thing about investing in cryptocurrencies [this year] was the tax break.”

Since the United States tax authorities and the Internal Revenue Service (IRS) have both treated crypto as an investment property since 2014 (but not a currency) – crypto users can allegedly benefit from the “special and favorable” taxation policy the country gives to these investments.

For all of the investments in the US – short-term gains and losses apply to holdings held a year or less. Moreover, any gains are taxable at a rate of as high as 40.8%, while long-term gains and losses max out at an upper bound of 23.8%.

While the losses can be used to offset taxes on gains for all investments, the potential tax relief may be greater than for traditional assets in the case of crypto, mostly because “a quirk” in US tax rules permits traders to sell and reinvest their crypto right away and in respect of the law.

This is mostly because cryptocurrencies are now exempt from the so-called “wash sale” rules which “prohibit capital loss deductions when investors purchase a security such as a stock within 30 days of selling a loser,” as the article suggests.

As previously reported on our site, data showed that ahead of the preceding tax year only 0.04% of tax filers were reporting capital gains from crypto investments to the IRS.