If you live in the USA and invest in crypto, you’ve probably wondered, “How do I avoid paying big taxes on it?” The IRS treats crypto like property, which means every time you sell or trade it, you might owe tax. Depending on how much you earn and how long you’ve held it, these taxes can reach up to 37%, which eats into your profits.
For many people, this feels frustrating. Instead of enjoying their earnings, they lose a large chunk to taxes. And because most investors only think about taxes when the deadline comes, they often end up paying more than needed.
Here’s the good news: you don’t have to. With smart, legal planning, you can reduce or even skip some of these taxes. In this blog, we’ll share practical strategies to help you save more of your crypto profits.
How To Avoid Crypto Taxes In The USA?
Crypto taxes in the USA can feel like a hit on your crypto gains. Giving away as much as 37% of your profits in taxes can be disheartening. But, what if we say we have got you plenty of answers to how to avoid paying taxes on crypto? Here’s a list of ways to avoid crypto taxes in the USA:
1. Tax Loss Harvesting
Tax loss harvesting is like turning a bad trade into something useful. If you sell your crypto at a loss, you can use that loss to lower the taxes you owe on your profits from crypto, stocks, or even other investments. You can also use it to cut down up to $3,000 from your regular income taxes.
If your losses are bigger than $3,000, don’t worry, you don’t lose them. You can carry them forward to the next year and keep using them until they’re fully counted. This way, your losses today can save you money in the future too.
Bonus Tip: Unlike stocks, crypto is not affected by the “wash-sale rule.” That means if you sell your coin at a loss and buy it back right away, you can still claim the loss on your taxes. |
2. Hold Your Crypto For Long Term To Avoid Short-Term Gains
In the US, if you sell crypto within a year and make a profit, it’s called a short-term gain. The IRS taxes this at the normal income rate, which can be very high for some people. So, quick flips often lead to big tax bills.
But if you hold your crypto for over a year, it counts as a long-term gain. These are taxed much lower, between 0% and 20%, depending on your income. That means more profit stays with you.
3. Identify Unrealised Gains and Losses
Unrealised gains and losses happen when the value of your crypto goes up or down but you haven’t sold it yet. These changes only count for taxes once you sell, trade, or spend the asset. Until then, the profit or loss is just “on paper” and not taxable.
By checking your portfolio often, you can plan smarter. If some coins are losing value and unlikely to bounce back, selling them could help you book a loss. That loss can then reduce the tax on your overall profits. Tools like KoinX make it easy to track and decide.
4. Maximize Your US Tax Deductions
When filing taxes in the US, you can choose either the standard deduction or itemized deductions. The standard deduction is quick and easy, but itemizing may save you more if you qualify for several deductions. Here are some common deductions you can use:
Deduction / Credit | Benefit |
Student Loan Interest | Deduct up to $2,500 of interest paid on student loans. |
Child Tax Credit | Up to $3,600 per child and $500 for dependents. |
American Opportunity Tax Credit | First $2,000 fully covered, plus 25% of next $2,000 (max $2,500). |
Medical Expenses | Deduct expenses above 7.5% of adjusted gross income. |
Child & Dependent Care Credit | Claim up to 50% of costs (max $8,000 per child). |
Lifetime Learning Credit | 20% of the first $10,000 spent on tuition and fees. |
Mortgage Interest | Deduct interest paid on home loans. |
Retirement Contributions | Deduct contributions to 401(k) or IRA. |
Health Savings Account (HSA) | Contributions are tax-deductible; withdrawals for medical costs are tax-free. |
5. Utilize Capital Gains Tax Breaks
Some crypto investors don’t need to pay capital gains tax at all, depending on how much money they make in a year. The IRS sets income limits, and if you stay under them, you can keep all your crypto profits without paying extra tax.
Filing Status | Income Limit | Do You Pay Capital Gains Tax? |
Single | Up to $44,626 | No, you don’t pay tax on gains. |
Married Filing Jointly | Up to $89,251 | No, you don’t pay tax on gains. |
Head of Household | Up to $59,751 | No, you don’t pay tax on gains. |
6. Gift Your Cryptocurrencies
Giving crypto as a gift is a nice and smart way to share with family or friends. In the US, you can give up to $19,000 worth of crypto to each person in 2025 without paying any tax. This rule is called the annual gift tax exclusion.
If you give more than this amount, you usually still don’t pay tax right away, as long as you’re under the lifetime limit of $13.99 million in 2025. But if you go over the yearly limit, you must file a form called Form 709.
Married couples can also use this rule together. For example, if one partner has a lower income, they may pay less tax when they later sell the gifted crypto. This helps families lower their total taxes.
7. Make Crypto Donations
You can give your crypto to charities and get tax benefits at the same time. In the US, if you donate to a registered charity, the amount you give can lower your taxable income. This way, both you and the charity win.
If you donate more than $5,000, the IRS asks for a special appraisal to prove the value, and you must report it with Form 8283. Always keep a receipt from the charity so your records are correct.
Donating crypto is often faster and cheaper than giving money the old way. It’s a simple way to support causes you care about and save on taxes.
8. Book Your Profits In A Low-Income Year
If you earn less money in a year, your tax rates are also lower. That’s a smart time to sell some of your crypto and take profits because you’ll pay less tax. This often happens when you are a student, between jobs, or working part-time.
Since your income is smaller, the IRS puts you in a lower tax bracket, so you save money on crypto taxes. By timing your sales during low-income years, you keep more of your profits and let your portfolio grow faster without losing too much to taxes.
8. Try Out Individual Retirement Accounts (IRAs)
An IRA is a special account that helps you save for retirement while paying less tax. With a Bitcoin IRA, you can buy and hold crypto for the long term, and you don’t pay taxes on the gains inside the account.
A self-directed IRA gives you even more choices. Besides crypto, you can also invest in things like real estate, gold, or other assets. This lets you grow your retirement savings while still getting tax benefits.
If you’re under 50, you can put in up to $7,000 each year. Many platforms, like iTrustCapital, Bitcoin IRA, and Coin IRA, make it simple to open these accounts and start investing in crypto for your future.
10. Choose The Best Accounting Method
The IRS lets you pick how you calculate the cost of your crypto when you sell it. This choice, called your cost basis method, decides how much tax you’ll pay. You must use the same method for the whole year.
Method | How It Works | Impact |
Spec ID | You pick exactly which coins you sold. | Flexible but needs detailed records. |
FIFO (First In, First Out) | Oldest coins are sold first. | Can mean higher taxes in rising markets. |
LIFO (Last In, First Out) | Newest coins are sold first. | May lower taxes if prices are rising. |
HIFO (Highest In, First Out) | Coins with the highest cost are sold first. | Usually lowers taxable gains the most. |
Using crypto tax tools like KoinX can help you compare these methods and find the one that saves you the most.
How Can KoinX Help Save Crypto Taxes In the USA?
KoinX makes it simple for American crypto investors to manage taxes by automating calculations, organizing transactions, and showing you the best ways to cut down your tax bill. Here’s how KoinX can help:
Automatic Transaction Tracking
By connecting your wallets and exchanges, KoinX gathers all your trades, income, and expenses in one place. This saves time, reduces mistakes, and makes filing taxes much easier.
Real-Time Gains and Losses
KoinX shows your unrealized gains and losses live, so you know exactly when it may be smarter to hold or sell. This insight helps you plan better and lower your taxable income.
Flexible Cost Basis Options
You can try different cost basis methods:
- FIFO,
- LIFO, or
- HIFO
These instantly see how each affects your taxes. This flexibility lets you pick the method that saves you the most.
Built-In Crypto Tax Calculator
The crypto tax calculator helps you estimate what you owe before filing. This way, you avoid surprises and plan your finances with confidence.
With KoinX, you can track, plan, and file your crypto taxes in the USA more effectively. Sign up on KoinX today to start saving time and reducing your tax stress.
Conclusion
Protecting your crypto profits starts with smart tax planning. Simple strategies like holding coins longer, offsetting gains with losses, or using tax-friendly accounts can help you lower your tax bill. Acting early instead of waiting until tax season makes a big difference.
With KoinX, you don’t have to worry about complex rules. It automatically tracks your trades, calculates gains and losses, and shows you ways to reduce your taxes. Start using KoinX today and keep more of your crypto profits in your pocket.
Frequently Asked Questions
What Role Does Holding Period Play In Reducing Crypto Tax?
One of the simplest and most effective strategies is to hold your cryptocurrency for more than twelve months before selling. In the US, assets held long term qualify for lower capital gains tax rates compared to short-term trades, which are taxed at ordinary income rates. By waiting the required period, you potentially reduce your tax burden significantly.
Can Crypto Held Within Retirement Accounts Be Tax-Advantaged?
Yes. Holding crypto inside certain retirement accounts, such as a self-directed IRA or similar accounts, can shield gains from immediate taxation. Depending on the account type (traditional or Roth), you may defer taxes until withdrawal or avoid taxes altogether on qualified distributions. However, these accounts often come with rules and restrictions.
What About Using Crypto Loans To Avoid Liquidation And Taxes?
Instead of selling crypto and triggering a taxable event, some investors borrow fiat (or stablecoins) using their crypto as collateral. Because a loan is not a sale, it generally does not produce a capital gain. This lets you access liquidity without disposing of your holdings and potentially avoid or delay taxes on gain.
Are There Risks Or Limits To These Tax Minimisation Strategies?
Yes. The IRS closely scrutinises tax avoidance, and strategies must comply with laws. Tax rules change, especially around crypto, and aggressive tactics may invite audits or penalties. Always ensure your approach is defensible and documented with thorough transaction records.
