How can you minimize taxes on cryptocurrency trading?
I bought one Ethereum last year for around 0 and ended up selling it early this year for around 50.
From what I'm reading, capital gains will be close to 40% on the 00 I made.
Is there a way to reduce the amount of taxes that I'm paying on cryptocurrency trading or is there a certain amount you need to make before the trades become subject to taxes?
I understand that holding the coins for longer than a year would change the tax from short-term to long-term gains, but is there anything else I could do?
EDIT: I'm an Indiana resident, but I bought and sold the Ethereum while at school in Kentucky.
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(Assuming US based on profile)
Welcome to the world of income taxation. Your ,000 in short-term gains will be treated as "normal income" and subject to your marginal tax rate. So there is fundamentally no difference in this and "I just got a ,000 bonus - how can I reduce the tax on that income". The answers would be the same:
Do something to increase deductions: e.g. donate to charity
Use it to fund an IRA
Sell other investments at a loss to offset the gains
Enjoy the 0 or so you get to keep and chalk it up to experience (e.g. consider taxes when investing and/or hold for more than 1 year)
I don't know state tax laws in your areas but I'm assuming you're more concerned about federal taxes.
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