US Traders Can Save On Their Crypto Taxes With A Few Smart Strategies

In 2017, we saw an 1800%+ increase in the price of a single Bitcoin, with the coin reaching an all-time high of $19,783.06 early in December 2017. The year was very positive for active cryptocurrency traders, giving them a significant gain on their Bitcoin investments. The price quickly started to decline again slowly, and today, a single Bitcoin is worth under $7,000. This is only one example of how we observed significant fluctuations in cryptocurrency prices in 2017.

The sudden drop in Bitcoin’s price causes many people to suffer substantial losses during 2018. Since most individuals who experienced a gain in profits during the 2017 Bitcoin price surge haven’t yet paid their crypto taxes for these profits, many now find themselves in a “tax trap” and have to start selling off the cryptocurrencies that are currently available in their portfolios in order to make up for their tax bills.

The Crypto Tax Trap

After a surge in Bitcoin price was experienced at the end of 2017, the price started to fall within the first quarter of 2018 rapidly. The sudden decline in Bitcoin value came to many as unsuspected, which means a lot of active crypto traders had suffered significant losses in their portfolio values.

This, however, does not exempt them from tax payments, as all active crypto traders are required to pay taxes for the profits they made in 2017, even though they might have suffered a serious loss during the first few months of 2018.

All crypto tax liabilities from 2017 need to be paid up by the 17th of April next year. Individuals are able to apply for an extension to the deadline for their crypto taxes, but late payments will yield a penalty fee of up to 25% the total amount of taxes that need to be paid.

How To Save On Your Crypto Taxes

Since many crypto traders now need to turn toward measures such as selling some of the cryptocurrencies that are currently part of their portfolio in order to pay their crypto taxes, these individuals are now seeking ways that they can save on the amount of taxes that they need to pay. It is important to turn toward legal strategies and not to overstep any particular rules that have been set out by the IRS, as this may yield further fines and penalty fees, adding more to the total tax that should be paid.

One of the best ways that a person can save is to determine if they may qualify for TTS, also known as Trader Tax Status. Meeting the qualifying criteria might allow the individual to deduct a series of trading expenses – including health insurance premiums, retirement plan contributions, home office expenses, and other general business expenses. This can provide a significant deduction to be made on the individual’s 2017 income report; thus giving them the opportunity to lower their tax payment drastically.

Certain criteria need to be met by a person before they can qualify for the TTS status. TTS requires a minimum of three trades executed on a daily basis, and this does not include exchanges that break a single transaction into multiple orders. A holding period of fewer than 31 days should also apply, and the taxable account size of the person needs to exceed $15,000 on an annual basis.

In addition to this criteria, TTS status also requires the crypto trader to participate in trading activities for four or more hours on a daily basis. This time requirement includes not only actual trades made but also the time spent on researching appropriate trades that can be included in the calculation. Automation features, internal trading operations, and the intention to make a supplemental living are also additional factors that are considered when the TTS status eligibility of a taxpayer is determined.


After many have suffered substantial losses due to the massive fluctuation in Bitcoin prices in the last year, people are now looking to sell some of their cryptocurrency holdings in order to pay their crypto taxes. With a few simple strategies, however, you might be able to save on your tax bill. Avoid late filing in order to prevent further charges, and follow the tips we provided to help reduce this year’s tax return payment.



“Bitcoin Hits a New Record High, But Stops Short of $20,000.” Fortune,