One BENEFIT of a market downturn: You can save a TON of $$$ on your taxes with this one simple crypto loop hole

One benefit of a market downturn: You can save a TON of $$$ on your tax bill for next year with this one simple crypto tax loop hole. Let's discuss...

If you sell or trade your crypto when it is below the price you originally acquired it for, you incur a capital loss. Capital losses get deducted from capital gains on your taxes, and overall, they reduce your taxable income for the year.

E.g. Let's say you bought bitcoin at $55,000 a month ago. If you sold or traded that BTC at market prices today ($32,000), you would lock in a capital loss for the year and significantly lower your taxes.

But it gets even better: Because the IRS classifies cryptocurrency as property and NOT as a security, "wash sale" rules do not apply to crypto as they do for stocks. This means you can buy the BTC that you sold back immediately and still realize the capital loss.

This is even MORE important if you have incurred gains earlier this year. Remember, capital losses deduct from capital gains on your tax return during the year they were realized. So if you've already "realized gains", you should take losses if possible to offset these gains.

E.g. Let's say you traded ETH for $MATIC at the height of the market. In doing this, you realized a taxable event and likely huge taxable gains as ETH was at all time highs. However, now your $MATIC is underwater (worth less than you got it for).

So, if you sell out of $MATIC today, and then immediately buy it back, you will realize losses and offset a lot of those gains that you realized from your trade of ETH to $MATIC This could save you a TON on your taxes. I know someone who reduced his tax bill by $43,000 by doing this!

This is a process known as Tax Loss Harvesting, and it's a strategy rich people use all the time to lower their capital gains tax bill every year (more info on TLH here).

Also, you can use crypto tax software tools like CryptoTrader.Tax or BitTaxer to automatically detect your biggest tax savings opportunities for you. (The tools cost money, but you can test them out for free)

So in summary: Take a look at your current positions and see if there is any opportunity to "harvest" losses. Doing this proactively can lead to HUGE tax savings for next year.