Mid-Year Crypto Tax Check: 5 Moves to Look At Before December

A lot of people think about crypto taxes in April, which is the worst possible time to think about them, because by then the year is over and your options are mostly gone. The middle of the year is when you can still do something. Here are five moves worth looking at now, while there’s time to act on them.

None of this is advice for your specific situation. It’s a checklist to take to someone who can run your actual numbers.

If you’re holding crypto that’s underwater, you may be able to sell it, book the loss to offset gains and up to a few thousand dollars of ordinary income, and buy it right back. With stocks, the wash-sale rule blocks that quick repurchase. As of now, because the IRS treats crypto as property rather than a security, that rule generally doesn’t catch a direct coin. Congress has tried to close this gap more than once, so it may not last, which is a reason to understand it while it’s here rather than assume it always will be.

If passing money to family is part of your plan, the annual gift exclusion resets every year, and it’s a use-it-or-lose-it number. Gifting appreciated crypto also moves future growth out of your estate. The catch is the paperwork and the basis rules, so this is one to set up properly rather than just send crypto and hope.

If you’re planning to take cash out of a position, it’s worth running the numbers on borrowing against it instead of selling, since a loan isn’t a taxable event the way a sale is. It’s not right for everyone, and the risks are real, mainly liquidation if the collateral drops. But a lot of people sell and pay the tax without ever checking whether borrowing would have cost them less. Check first.

If your crypto is inside an LLC, mid-year is a good time to make sure the records actually match how you’ve been operating, that the banking and the entity paperwork line up, and that you’ve got a clean log of what moved where. Sorting this out in July is a small task. Reconstructing it next April, from memory, is not.

If giving is on your radar, donating appreciated crypto directly, rather than selling and donating the cash, generally lets you skip the capital gains and still take a deduction. For a large, low-basis position that can be one of the more efficient things you do all year, but the appraisal and documentation rules are strict, so it’s worth setting up with a professional well before December.

You don’t have to act on any of these today. The point is that in July you have choices, and in April you mostly have a bill. A short conversation now with a CPA who actually understands digital assets is worth far more than a long one after the year has closed.

If you want to walk through which of these fit your own situation, it’s worth sitting down with your CPA, and the team at Digital Ascension Group can help you get to the right people. You can start that conversation at DAG.com.

Disclaimer: This article is published for general educational and informational purposes only. It is not investment, financial, legal, tax, accounting, or other professional advice, and it is not a recommendation, offer, or solicitation to buy or sell any security, product, or service, or to adopt any strategy. Tax laws change and apply differently to every situation, and the treatment described can change. Reading this article does not create an advisory, attorney-client, fiduciary, or client relationship of any kind. Any figures are illustrative and may change without notice. Tax decisions should be made only with your own qualified, licensed CPA or tax professional. The views expressed are the author’s own and may not reflect those of Digital Ascension Group or its affiliates, who accept no liability for actions taken based on this content.