A prominent lawyer in the XRP community has shared some valuable tax advice for crypto investors, especially those who trade frequently. Jeremy Hogan, who runs a popular YouTube channel called Legal Briefs, explained how switching between cryptocurrencies could affect one’s tax rate and offered some suggestions on minimizing tax liabilities.
Hogan’s tax tips were posted on the X social media platform, a decentralized network powered by the XRP Ledger. He used a hypothetical scenario to illustrate his point: an XRP holder who sold 100,000 XRP at $0.50 in January 2021 and bought back 150,000 XRP at $0.33 in February 2021, expecting to increase their XRP holdings by 50%.
However, Hogan pointed out that this strategy could backfire regarding taxes. By selling and repurchasing XRP, the investor triggered a taxable event and reset their holding period. It means they would have to pay short-term capital gains tax on the $50,000 profit from the sale, which could be as high as 30%, depending on their income bracket and state. Additionally, they would have to wait another year before qualifying for the lower long-term capital gains tax rate, which is 15% for most taxpayers.
Hogan suggested a better alternative would be to use a margin loan to buy more XRP without selling the original holdings. This way, the investor would avoid triggering a taxable event and preserve their long-term capital gains status. Hogan also advised investors to consult a tax professional before making any trading decisions, as tax laws can be complex and vary by jurisdiction.
Crypto Tax Laws Around The World
Hogan’s tax advice is relevant for cryptocurrency investors in the United States, where the Internal Revenue Service (IRS) treats cryptocurrencies as property for tax purposes. Every time a cryptocurrency is sold, exchanged, or used to purchase goods or services, it is considered a taxable event, and the gain or loss must be reported on the tax return.
But, tax rules for cryptocurrencies differ in each part of the world. Some countries have better or no tax rules for making money from crypto. It can happen by special laws or not having a capital gains tax. For example, Portugal does not charge taxes on gains from using crypto for personal use. Singapore considers crypto an intangible asset, so it doesn’t tax capital gains in this area. Malta excludes long-term holding benefits because they see them like portable property with no need to pay taxes directly tied to lengthy periods.
Other countries, such as Switzerland, Germany, and Belarus, have adopted crypto-friendly tax policies, while some, such as France, Spain, and the United Kingdom, have more complex or unclear rules. Therefore, crypto investors need to research the tax laws of their respective countries and seek professional guidance if needed.
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The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.
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