So you’ve invested in the crypto market, done your research and believe you have a pretty solid portfolio. You’ve also moved your assets onto a hard wallet, or LEDGER to keep it safe from online hackers. You’re waiting patiently for that foretold bull market that experts tell us is coming in 2025. But have you thought about what you’ll do with all those tokens that moon during the bull run? What is your exit strategy? Many investors don’t have one. “I’ll just cash out and put my earnings in my bank account” – I’ve heard many people say this, but really, is that the best plan?
In the United States, the Internal Revenue Service (IRS) considers cryptocurrency as property for tax purposes. This means the tax treatment of cryptocurrency transactions, including gains and losses, is like other forms of property, such as stocks or real estate.
When a taxpayer sells or exchanges cryptocurrency, any gain or loss on the transaction must be reported on their tax return. If the cryptocurrency was held for less than a year before being sold or exchanged, any gain is considered a short-term capital gain and taxed at the taxpayer’s ordinary income tax rate. If the cryptocurrency was held for more than a year before being sold or exchanged, any gain is considered a long-term capital gain and taxed at a lower capital gains tax rate.
If a taxpayer receives cryptocurrency as payment for goods or services, the fair market value of the cryptocurrency at the time of receipt is included in their gross income and taxed accordingly.
It is important to note that cryptocurrency exchanges are not required to provide taxpayers with a 1099 form, like traditional brokerages are required to do for stocks. Taxpayers must keep accurate records of their cryptocurrency transactions, including the date, amount, and fair market value of each transaction.
Is it wise to cash out and pay the tax man, maybe giving away more than half your earnings? Or would a better idea be to find a crypto haven – a country that is crypto friendly?
is a crypto tax calculator. It lists several country-specific tax guides covering everything you need to know about paying your capital gains on your crypto investments.
Uprooting your family and/or leaving family and friends behind to save money is not the easiest thing to do. For some it is impossible. But if you want to reduce your capital gains on crypto earnings, you will have to relocate. The biggest question is: Where do you go?
Tax rules around the world differ from country to country. There are countries where you pay little to no tax and others with huge taxes.
Places That Don’t Tax Crypto
After some digging, I’ve found a great resource, so if you’re a crypto millionaire or are sure you will be one in just a few short years, pack your bags and pick your favorite place from these countries listed below.
10 Countries That Are Crypto Tax Haven
You can do nothing about the crypto trade tax; you just have to pay the tax. However, you might be able to avoid paying tax with careful planning. Here is a list of crypto-friendly countries you may wish to research:
Cayman Islands
Portugal
Singapore
Slovenia
Puerto Rico
Moving to a tax-free country is not what every investor wants. However, will you be in the market for the next cycle? If the answer is yes, you might want to choose your options and plan to maximize the best you can.
Research a country before moving there. Know what rules govern the country you are based in right now and the one you wish to relocate to. Or, stay home, pay the piper and be thankful that you had the foresight to invest in this up and coming market. After all, you are at the very beginning of this complicated and potentially explosive new world of finance.
