Want to make a little money from all your losses?
You can.
It's called tax loss harvesting. And unfortunately, most of us probably have a decent amount of it available this year.
If you play the game right, you can reset your basis & pay less in taxes.
Here's how...
First though: I am not an accountant. I am a monkey on the internet. I believe whatever I'm about to tell you is correct and am doing it myself, but please get financial advice from professionals if a lot of your hard earned money is at stake.
Cool cool cool.
Moving on.
You can use investment losses to offset any investment gains you have that same calendar year.
Let's use an example.
Say you booked $10k of gains before Sam wrecked your shit.
(Good for you, cause I most certainly did not.)
Normally you'd pay taxes on those gains, up to 20% if you held the investment more than 12 months.
This is the long term capital gain rate. If you held the investment less than 12 months like the degen you probably are, you'd pay whatever your incremental personal tax rate is.
But let's say you then invested more money and now have $25k of losses from Solana doing some good old fashioned bed shitting.
You can use those losses to offset your prior gains and avoid paying taxes on them.
That $10k gain is normally subject to at least 20% in taxes, or $4k.
But with your losses you can effectively net your gain to zero and not pay that $4k.
But wait, there's more! You can also offset another $3k of ordinary income (think W2).
AND the losses roll into next year!
We've offset $10k of investment gains and $3k of ordinary income with our losses. But we still have $12k left.
What do we do with that?
Next year gets the same treatment.
If you make $15k in gains next year you can offset $12k of it.
Or $9k gains & $3k of income = $12k
Nice.
If you lost $30k this year with no gains and never make another dime of investment money, you can spend the next 10 years using your $3k of ordinary income offset.
If you lost $300k, unless you're a vampire, you're eventually gonna need some investment wins to offset everything.
An important note: while this works for federal taxes everywhere in the US, different states can have different rules.
For example, Pennsylvania does NOT allow you to roll forward losses. You are limited to that calendar year.
And a fun little loophole with crytpo (that I would double check with your accountant): I was told by my taxman that there's no wash rule.
With stocks you can't sell and immediately rebuy, you must wait 30 days.
W/ ETH or SOL you can sell, take the loss, & buy it right back.
Lastly, note this strategy is allowed because it resets your basis.
If you bought SOL at $250 (sorry) you'd have to sell it over $250 to be taxed on it.
If you rebase it to $13 (again, sorry) any future sales over $13 you'd have to pay gains on.
It's not a free lunch.
But what it does do is allow you keep more money TODAY so that you can reinvest it and hopefully compound it into more money over time.
Do what's right for you, and good luck!
If you enjoyed this thread, good! That was the point. I don't need anything else from you.
Just trying to help out.
Enjoy your day!