How to Cash Out Crypto Without Paying Taxes | CoinLedger
2024.12.12 21:08💸 Lost money in crypto last year? You can save thousands on your taxes. Learn more 🔍 SURVEY: Most investors don’t know that crypto losses can lead to massive tax savings! Learn more Product How CoinLedger Works Tax Reports NFT Tax Software For Tax Professionals Portfolio Tracker new Integrations Learn Crypto Taxes 101 USA Australia Canada United Kingdom India Ireland Germany New Zealand South Africa Spain Sweden Crypto Tax Guides Blog Learn Crypto Basics About Us Pricing Tax Reports (DIY) Professional Services Sign Up Log in Product How CoinLedger Works Tax Reports NFT Tax Software For Tax Professionals Portfolio Tracker new Integrations Learn USA Australia Canada United Kingdom India Ireland Germany New Zealand Japan Denmark Spain South Africa Sweden Crypto Taxes 101 Crypto Tax Guides Blog Learn Crypto Basics About Us Pricing Tax Reports (DIY) Professional Services Log in Sign Up BLOG / Crypto Taxes Expert verified 7 min read
How to Cash Out Crypto Without Paying Taxes
Written by: Miles Brooks Written by: Miles Brooks Director of Tax StrategyMiles Brooks holds his Master's of Tax, is a Certified Public Accountant, and is the Director of Tax Strategy at CoinLedger.
Reviewed by: Jordan Bass Reviewed by: Jordan Bass Head of Tax StrategyJordan Bass is the Head of Tax Strategy at CoinLedger, a certified public accountant, and a tax attorney specializing in digital assets.
Our Editorial Standards: Our content is designed to educate the 500,000+ crypto investors who use the CoinLedger platform. Though our articles are for informational purposes only, they are written in accordance with the latest guidelines from tax agencies around the world and reviewed by certified tax professionals before publication. Learn More on this pageKey Takeaways
Disposing of crypto (selling it or trading away) is subject to capital gains tax. There is no tax for simply holding your crypto. Strategies like tax-loss harvesting can help you legally reduce your cryptocurrency taxes.Looking to cash out your crypto without paying taxes? In this guide, we’ll walk through a few strategies that can help you save thousands on your tax bill.
Pro tip: Do I need to pay taxes on crypto if I don’t cash out?
There is no tax for simply holding cryptocurrency. You won’t be required to pay tax unless you dispose of your crypto or earn interest income on your cryptocurrency.
What happens if I don’t report my crypto to the IRS?
Not reporting your cryptocurrency transactions to the IRS is considered tax evasion — a serious crime with serious consequences. The maximum penalty for tax evasion is 5 years in prison and a fine of $100,000.
Though cryptocurrency transactions are pseudo-anonymous, it’s important to remember that the IRS has tools to match your wallet to your identity. Major exchanges like Coinbase issue 1099 forms to the IRS that contain customer information and detail your taxable income for the year.
In addition, it’s important to remember that transactions on blockchains like Ethereum and Bitcoin are publicly visible and permanent. In the past, the IRS has worked with contractors to analyze blockchain transactions and identify ‘anonymous’ wallets.
How to legally cash out your cryptocurrency without paying taxes
Converting your cryptocurrency into fiat currency is subject to capital gains tax. However, there are strategies that help you legally reduce your tax bill on your cryptocurrency profits .
Take your profits in low-income years
The lower your income for the year, the lower the tax rate you’ll pay on your cryptocurrency income.
To minimize your tax bill, consider cashing out your crypto in years when your income is low. Many investors choose to realize profits in years where they are between jobs or they are studying full-time.
Harvest losses
Selling your cryptocurrency at a loss can help offset potential gains and reduce your tax bill!
When you harvest losses , you can offset your gains from cryptocurrency, stocks, and other assets and up to $3,000 of income. Any net losses above this amount can be carried forward into future tax years.
Crypto IRAs
Crypto IRAs (individual retirement accounts) can help you grow wealth on a tax-free or tax–deferred basis. While most retirement plan providers don’t allow you to invest in cryptocurrency IRAs directly, you can use a self-directed IRA provider like iTrustCapital , Bitcoin IRA , or Coin IRA .
Remember, crypto IRAs are recommended for those who are looking to hold their cryptocurrency for long periods of time. There are penalties for withdrawing your crypto before retirement age.
Take out a cryptocurrency loan
Instead of cashing out your cryptocurrency, consider taking out a cryptocurrency loan .
In general, loans are considered tax-free . That means that if you’re looking for access to fiat currency, taking out a loan may be a great alternative to selling your cryptocurrency.
Move to a low-tax state or country
While it may seem like an extreme step to take, some investors do choose to relocate to low-tax states . Currently, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have no income taxes (though New Hampshire taxes interest and dividends).
Some investors even choose to relocate to countries where cryptocurrency isn’t taxed . At this time, cryptocurrency is tax-free for individual investors in countries like the United Arab Emirates and Malta.
For more tips, check out our guide on how to legally avoid cryptocurrency taxes .
How is cryptocurrency taxed in the US?
Before we take a look at our tax-saving strategies, let’s walk through the basics of how cryptocurrency is taxed in the US.
In the United States and most other countries, cryptocurrency is subject to capital gains and ordinary income tax.
Cashing out cryptocurrency to fiat currency is considered a disposal subject to capital gains tax.
For more information, check out our ultimate guide to how cryptocurrency is taxed in the United States .
How much taxes do you pay when you cash out crypto?
How much tax you pay on your cryptocurrency disposals depends on multiple factors, such as your total income for the year and how long you held your cryptocurrency.
Long-term capital gains tax
If you dispose of your cryptocurrency after longer than 12 months of holding, you’ll pay long-term capital gains tax ranging from 0-20%.
Tax Rate Single Married Filing Jointly Married Filing Separately Head of Household 0% Up to $47,025 Up to $94,050 Up to $47,025 Up to $63,000 15% $47,026 – $518,900 $94,051 – $583,750 $47,026 – $291,850 $63,001 – $551,350 20% Over $518,900 Over $583,750 Over $291,850 Over $551,350Short-term capital gains tax
If you dispose of your cryptocurrency after less than 12 months of holding, your profits will be considered ordinary income and taxed between 10-37%.
Tax Rate Single Married Filing Jointly Married Filing Separately Head of Household 10% $0 to $11,600 $0 to $23,200 $0 to $11,600 $0 to $16,550 12% $11,601 to $47,150 $23,201 to $94,300 $11,601 to $47,150 $16,551 to $63,100 22% $47,151 to $100,525 $94,301 to $201,050 $47,151 to $100,525 $63,101 to $100,500 24% $100,526 to $191,950 $201,051 to $383,900 $100,526 to $191,950 $100,501 to $191,950 32% $191,951 to $243,725 $383,901 to $487,450 $191,951 to $243,725 $191,951 to $243,700 35% $243,726 to $609,350 $487,451 to $731,200 $243,726 to $365,600 $243,701 to $609,350 37% $609,351 or more $731,201 or more $365,601 or more $609,351 or moreFor more information, check out our guide to crypto tax rates .
How do I cash out Bitcoin and other cryptocurrencies?
Centralized exchanges
Centralized exchanges like Coinbase , Binance , and Kraken are the easiest way to cash out cryptocurrency. These exchanges allow you to sell your crypto for fiat — then transfer the funds to your bank account!
Peer-to-peer trades
Peer-to-peer (P2P) trading platforms — such as Paxful — allow users to sell cryptocurrencies directly to other individuals. Sellers can choose from multiple payment methods — such as wire transfer and even cash in a face-to-face transaction!
Cash out at a Bitcoin ATM
Bitcoin ATMs allow you to automatically trade your Bitcoin for cash. These ATMs automatically connect to the blockchain to verify your identity. Then, you’ll be able to make a cash withdrawal!
Bitcoin ATMs typically charge high fees — especially compared to traditional exchanges.
Trade crypto for another
Most centralized exchanges allow you to trade one cryptocurrency for another. Some exchanges may require you to convert to a stablecoin like USDC or USDT before purchasing another cryptocurrency.
How CoinLedger Can Help
Looking for an easy way to save money on your cryptocurrency taxes? CoinLedger can help. The platform is built to minimize the amount of taxes you owe from crypto.
Today, more than 500,000 investors use CoinLedger to find their largest tax-saving opportunities and generate a complete tax report in minutes.
Get started with a free CoinLedger account .
Frequently asked questions
How do I avoid taxes when cashing out crypto?There is no way to legally avoid taxes when cashing out cryptocurrency. However, strategies like tax-loss harvesting can help you reduce your tax bill legally.
Do I have to pay tax for withdrawing crypto?Converting crypto to fiat currency is subject to capital gains tax. However, simply moving cryptocurrency from one wallet to another is considered non-taxable.
Can you get caught not paying taxes on crypto?Yes. The IRS works with contractors like Chainalysis to analyze publicly available blockchain transactions and crack down on tax fraud.
Do you have to pay taxes on Bitcoin if you don’t cash out?There’s no need to pay taxes on cryptocurrency unless you’ve disposed of it (ex. sold or traded it away) or earned crypto income (ex. staking & mining rewards).
Do you have to pay tax on crypto if I didn’t make money?Claiming capital losses from cryptocurrency can offset capital gains and reduce your tax bill.
CRYPTO TAXES OVERVIEW How are cryptocurrencies taxed? How do you report cryptocurrencies on your taxes? What's the tax rate for cryptocurrencies? Want to try CoinLedger for free? Claim your free preview tax report.
Join 500,000 people instantly calculating their crypto taxes with CoinLedger.
How we reviewed this article
Edited By SourcesAll CoinLedger articles go through a rigorous review process before publication. Learn more about the CoinLedger Editorial Process.
Written by: Miles Brooks Director of Tax StrategyMiles Brooks holds his Master's of Tax, is a Certified Public Accountant, and is the Director of Tax Strategy at CoinLedger.
About the Author Reviewed by: Jordan BassHead of Tax Strategy
Edited by:
CoinLedger has strict sourcing guidelines for our content. Our content is based on direct interviews with tax experts, guidance from tax agencies, and articles from reputable news outlets.
KNOWLEDGE BASE
Demystify Crypto Taxes
The Ultimate Crypto Tax Guide (2024)
This guide breaks down everything you need to know about cryptocurrency taxes, from the high level tax implications to the actual crypto tax forms you need to fill out.
Crypto taxes overviewCrypto Tax Rates 2024: Complete Breakdown
Here’s how much tax you'll be paying on your income from Bitcoin, Ethereum, and other cryptocurrencies.
Crypto tax ratesHow Crypto Losses Can Reduce Your Taxes
Crypto and bitcoin losses need to be reported on your taxes. However, they can also save you money.
How crypto losses lower your taxesCalculate Your Crypto Taxes
No credit card needed Instant tax forms No obligations Get Started For Free Crypto taxes done in minutes. United States United States Australia Canada New Zealand Germany Japan Ireland Austria Switzerland Denmark Spain France Sweden South Africa United Kingdom Product How It Works Reviews Pricing Tax Professional Suite Tools Crypto Tax Calculator Crypto Profit Calculator Crypto Portfolio Tracker Crypto Balance Checker CryptoDashboard Bitcoin Rainbow Chart Bitcoin Dominance Chart Crypto Converter Crypto Fear and Greed Index Company About Us Partner With Us Careers Press Contact Us Compare Blog Support FAQs Help Center Security Legal Terms & Conditions Privacy Policy Disclaimer User Links Crypto Tax Guides Affiliate Program Find a Crypto Tax Expert Tools Login Annual Crypto Tax Report Country Site Map Agencies Crypto Lawyer Directory © Copyright 2024 - Coin Ledger, Inc. Contact Support Jump to