2024 has been a great year for investors in cryptocurrency, with Bitcoin reaching all-time highs.

But your high profits can trigger high taxes.

Key point. To trigger taxes, you must sell or use the crypto to buy things.

That said, let’s return to the issue at hand—your high profits can trigger high taxes.

Fortunately, you can put several strategies into play before year-end to reduce not only your 2024 crypto taxes but also your future crypto taxes.

Step-Up Tax Basis with Tax-Gain Harvesting

If you expect your income to be higher next year and your crypto to continue to appreciate, it could be wise to step up your basis in your crypto by harvesting tax gains.

It works like this: You sell your crypto this year and realize your gains. You then repurchase the position. As a result, your tax basis in the crypto is stepped up to the current price.

Example. You purchased one Bitcoin for $20,000 two years ago—your basis is $20,000. You sell the Bitcoin in December 2024 for $80,000, realizing a $60,000 long-term capital gain, which you’ll pay tax on at the 15 percent long-term capital gains rate. You immediately repurchase one Bitcoin for $80,000.

Now your basis is $80,000. If Bitcoin goes up to $100,000 next year (or in any future year), you’ll have only a $20,000 taxable gain instead of an $80,000 gain.

Key point. Remember, if you’ve held your crypto for less than one year, ... Log in to view full article.