This is all within the IRS rule book. But make sure to check the rules for yourself:

https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions

And ask for professional advice if you need help with your taxes.

First, understand how taxes work on gains in the US.

How crypto is treated:

Crypto follows the same rules as capital assets.

When you sell, or exchange your crypto, or make a purchase, it's a taxable event with potential capital gains/losses.

There's also income if you receive an aidrop, a Coinbase reward, mining reward, staking reward, etc...

The only non-taxable events in crypto is purchasing crypto with fiat, gifting (with some caveat), and making transfers between wallets you own.

How captial gains are taxed:

I'll keep it simple, but understand that you still have to keep in mind your income, your other deduction, offsetting losses etc...

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1- Short term gains (sold under one year). Taxed at 10%-37%, but always higher than long term taxes.

2- Long term gains (sold over a year). Taxed at 0%, 15%, or 20%.

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Keep in mind those rates are incremental and not absolute. If you're in the 20% "bracket", it doesn't mean that your entire gains are taxed at 20%. Only the amount over each threshold.

The "loopholes":

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1- Long term gains strategy.

Selling long term will cut down how much you owe. Someone low income, who only had moderate gains, may pay as little as 0% on capital gains.

Have a plan on when you sell, and double check the dates before selling something.Even when you buy, consider if you'd be willing to wait until this time next year before you can sell it.

This is probably the easiest way to cut down your taxes.

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1- Splitting years.

This is something definitely useful for people with big gains.

There may be cases where instead of realizing your entire gains on the same year, you can split them between two years.

You may also want to look at the year where you expect the least income.

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3- Offsetting losses.

Capital losses can offset your capital gains.

If they exceed your capital gains, you can only use up to $3,000 of excess towards your taxes for the same yea ($1,500 if married and filing separately.

This will be important for the next two strategies.

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4- Wash trading.

The infamous "loophole" that's about to go away.

Normally, wash sales rules apply in 30 day window limit. Where you can't take advantage of losses in trades, and quickly buy back the same security.

But since crypto was classified as property, that rule didn't apply. It was a way for traders to offset gains with their losses.

That rule may change for the tax year in 2022.

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5-Loss harvesting.

While the wash sales rule may start to apply, it doesn't mean you can't still do some loss harvesting outside a 30 day window. It does become a little more tricky, and is definitely no longer something for everybody.

But there may be scenarios where you could gamble on a dip, to harvest a loss. Buy back over 30 days later. Obviously, timing will no longer be that great.

You can also simply harvest a loss on things you simply don't trust anymore.

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6-Gifting.

Gifting is actually a false loophole. I thought I'd add it on here since it's commonly mistaken as a loophole.

Gifting is a "tax free" transfer, or non-taxable event. Meaning, as the donor, you give up your tax obligations, don't owe any capital gains. The recipient doesn't owe any income tax either. They'll just take on your cost basis, or if you are giving your crypto at a time and it has a loss, they may take on the cost basis at the time of transfer.

But gifting, isn't a "loophole" for you to reap benefits from your crypto. Nor can you share your capital losses (by design in the cost basis).

People try to get around paying income all the time using "gift" as an excuse. But the IRS has seen it all. So it's probably not gonna work as a loophole.

You can't gift someone some crypto, and expect anything in return. You can't get anything in return like cash, goods, etc...You also want it to be very much a clear gift situation. No grey area. Remember, the burden of proof falls on you. So you have to be able to prove it to the IRS, not the other way around.

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7-Charitable contributions.

This is for actual donations to official charities. It can help cut down what you owe a little bit.

This gets a little more complicated, between itemized and non-itemzied. Without itemizing you may only be able to deduct up to $300, or $600 for joint filling.

But if you made any donation to official charities that you can backup with documentation, then you could potentially reduce what you owe.

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8-QOZ (qualified opportunity zones)

If you are looking for the way "rich people" are avoiding taxes. This is it.

Now this one is a little more technical and definitely not for everybody. Mainly for people with really a lot of money. You'll want to definitely use a CPA for this.

With QOZs, you can cash out your crypto gains, then place those gains into investements (typically real estate) in those qualified opportunity zones. Which are basically disadvanged neighborhoods that the goverment wants investors to revive.

If you invest your gains into a QOZ, you won't have to pay your capital gains that year, it will be deferred, and you will end up paying reduced taxes a few years later. You could potentially even pay 0% captial gains, if you keep those QOZ investments more than 10 years.

They do come with risks. You're investing in places where normally people wouldn't invest. So you don't know if you're gonna lose money after 10 years. And there is a limited list of qualified investments you have to chose from.

But for crypto millionaires, it might be worth putting parts of their gains into a QOZ. If they're lucky, not only will they pay very little taxes, but that QOZ investment could have gains of its own.