Top 10 Cryptocurrency Tax Tips and Strategies for Investors in 2023

crypto tax tips

Hello, I’m John. As you navigate through the fast-paced universe of crypto and Web 3.0, you need more than just a legal expert who comprehends the intricacies of the industry; you need someone who can establish a trust-filled relationship with you. I’ve found that the foundation of successful collaboration rests on a robust personal connection and mutual trust between client and counsel.

As a lawyer, I consider myself a service provider first, putting utmost value on active listening and prioritizing my clients’ input and guidance. Being mindful of the swift pace of our field, I strive to deliver efficient and competent service, acknowledging that time is critical.

Having transitioned from being self-taught to receiving training at top-notch law firms like Locke Lorde, I’ve honed my skills and kept up-to-date with the latest crypto trends. I understand the importance of continuous learning and adaptation in this ever-changing environment, ensuring that my expertise benefits you without adding unnecessary cost.

Over the years, I’ve had the pleasure of serving stellar clients—including the Uniswap Foundation, Shade Protocol, SaucerSwap, CityDAO, Graffle Labs—tailoring services to meet their unique needs and financial capabilities. Recognizing the necessity of adjusting legal costs according to your company’s stage and size, I strive to provide you with the most beneficial guidance without stretching your resources.

To summarize, my goal is to provide you with personalized, top-tier legal services, foster a relationship built on trust, and ensure alignment with your vision every step of the journey. As we explore the tax-related intricacies of cryptocurrency, here are ten essential tips that you might find beneficial for your tax strategy.

With every tax year’s conclusion, it presents a chance to review your investment portfolio and formulate a tax plan for the subsequent year. If you’ve started investing in cryptocurrency, here are nine tax-related tips regarding cryptocurrency that you might find beneficial for your tax strategy.

Tip #1 – Retain Your Cryptocurrency for Over a Year

The taxation of cryptocurrency depends on its holding duration and is categorized under capital gains. If held for under a year, the tax rate can vary between 10% and 37%, dependent on your income and filing status. However, for digital assets held for more than a year, the tax rate could range from 0% to 20%.

Tip #2 – Utilize Tax-Oriented Cryptocurrency Software

By integrating your crypto wallets and exchanges with a crypto software tool, you can automate and ease your tax obligations. These tools can track transactions as far back as 2014, assisting you in claiming prior tax losses.

Tip #3 – Make Purchases and Sales via an IRA or 401k

Investing in cryptocurrency through your retirement account lets you defer or even fully avoid taxes on your cryptocurrency. The income and gains made through your retirement account are funneled back into the account, with taxes either deferred or nullified.

Tip #4 – Leverage Qualified Opportunity Funds

Qualified Opportunity Funds (QOFs) comprise corporations and partnerships that invest in financially troubled communities. By reinvesting your crypto gains into a QOF, your taxes can be deferred. The longer the funds remain in a QOF, the more tax reduction benefits you receive. After five years, there’s a 10% reduction in capital gains taxes, which increases to 15% after seven years. After ten years, any appreciation on the investment is tax-exempt.

Tip #5 – Make Donations to Charities

Donating your crypto assets to an eligible charity entitles you to a tax deduction equivalent to the fair market value of the asset at the time of donation. Plus, you will not have to pay capital gains tax on the donated assets.

Tip #6 – Bestow Your Cryptocurrency as a Gift

You can decrease your tax obligations and share your wealth by gifting your cryptocurrency. Keep in mind, you will not be taxed on the gifted crypto; however, the recipient is liable for tax on it if they sell, trade, or utilize it.

Tip #7 – Reside in Puerto Rico

For significant players in the crypto investment market, it might be worth considering moving to Puerto Rico. If you purchase a home there within two years of your move, you will enjoy a 0% tax rate on capital gains, allowing you to retain all of your crypto profits.

Tip #8 – Implement a HIFO Algorithm

For tax calculations, you can apply a particular identification method stipulated by the IRS known as Highest-In-First-Out, or HIFO. With the right criteria entered into a crypto tax software, the HIFO algorithm will opt for the most expensive crypto you’ve purchased for selling first, resulting in minimal capital gains taxes and thus, a smaller tax bill.

Tip #9 – Practice Tax Loss Harvesting

Should your crypto portfolio encounter a downturn, you can offload those crypto investments that have depreciated to “harvest” those losses for tax benefits. These realized or “harvested” losses can be utilized to balance your taxable capital gains. The tax savings can then be reinvested back into your portfolio.

Keep Detailed Records

Maintaining accurate records of your cryptocurrency transactions is essential for tax preparation. The records should include the dates of the transactions, the value of the cryptocurrency in fiat currency at the time of the transaction, the purpose of the transaction, and the recipient’s details if it was a gift or payment. These records will simplify the tax filing process and help you avoid any penalties from incorrectly reported transactions.

To delve deeper into how you can optimally strategize your cryptocurrency investments, reach out to our proficient cryptocurrency and tax advisors by emailing

Also, feel free to fill out a contact form on our website.

Legal Disclaimer

The information provided in this article is for general informational purposes only and should not be construed as legal or tax advice. The content presented is not intended to be a substitute for professional legal, tax, or financial advice, nor should it be relied upon as such. Readers are encouraged to consult with their own attorney, CPA, and tax advisors to obtain specific guidance and advice tailored to their individual circumstances. No responsibility is assumed for any inaccuracies or errors in the information contained herein, and John Montague and Montague Law expressly disclaim any liability for any actions taken or not taken based on the information provided in this article.

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