In this video from MyDigitalMoney, accountant David Spencer explains a legal exemption or loophole called The Wash Sale rule that could potentially lower your taxes on cryptocurrency investments.
While the government has the tools to track crypto transactions and taxes must be paid on them, this rule allows investors to sell a stock at a loss and claim that loss, then immediately buy the same stock back, effectively not selling it but claiming the loss on paper. This can help reduce tax liability, and the IRS has not yet created this rule for crypto, providing a potential loophole.
Spencer cautions that while this loophole can be used, investors should be careful not to abuse it, as the IRS may create a similar rule for crypto in the future. He also notes that tax laws can be complex and recommends seeking advice from a tax professional to ensure compliance.
MyDigitalMoney’s video highlights this legal strategy for reducing crypto taxes and serves as a useful resource for investors looking to manage their tax liability.
