Abhinav R. Soomaney aims to help crypto users through Cryptocurrency in a Nutshell. His book outlines the ins and outs of cryptocurrency, such as NFTs, tax implications, mining, crypto debit cards, and price factors. Since 2018, Soomaney has consulted with investors on cryptocurrency tax calculations and investment management. He has also spoken on global summit panels about the trajectory of cryptocurrency and blockchain.
Soomaney credits Bitcoin inventor Satoshi Nakamoto as being foundational to cryptocurrency's success. Today, the industry's market size is in the billions as investors seek decentralized alternatives to traditional banking. Cryptocurrency users conduct transactions that are public, nonreversible, timestamped, and more immediate than traditional processes. Blockchain is the data recording system that makes these features possible.
Strategies To Save Money on Taxes
Based on his research, Soomaney recommends multiple money-saving strategies.
"Minimize capital gains by using the Highest-In-First-Out tax calculation method. This allows you to use the highest cost basis pool against the first sale until that inventory pool is completely exhausted," said Soomaney.
According to Soomaney, HIFO can minimize capital gains but can increase tax obligations in shifting long-term to short-term.
"If someone generally trades everything within a year, then HIFO is preferred-but, if someone has a mixture of temporal trading strategies, then it is hard to tell which is best without running different scenarios," noted Soomaney.
Soomaney also advises maintaining accurate records of tokens that are transferred across platforms. This will help determine short-term versus long-term capital gains in addition to ensuring accurate tax reporting.
Taxes vary depending on which attribute of cryptocurrency is being used. DeFi, NFTs, mining, and staking all yield different money-saving tips.
With staking taxes, for instance, Soomaney said, "Tokens received as rewards will be taxed as ordinary income at the time of deposit. When you sell these reward tokens, the variance between your cost basis when tokens were received and sales proceeds when these reward tokens were sold will be calculated as capital gains. Alternatively, you can also consider these rewards as 100% taxable income and record that only when you sell these reward tokens. This is easier for investors and involves less tracking."
Another tip that Soomaney offers pertains to losses due to exchange bankruptcies.
"Such losses cannot be written off against capital gains as, per the law, crypto tax regulations and investors that have lost their holdings on platforms like Celsius (unable to withdraw funds) might have to bite the bullet unless the government introduces a fair law in favor of investors," said Soomaney. "When we talk about token sell offs, capital gain/loss calculations must be done very cautiously by investors to ensure accuracy and use the right calculation method based on their trading patterns."
Recently, multitudes of people have cashed out their cryptocurrencies. These transactions are impacting the industry-at-large and have tax implications. According to Soomaney, crypto users should do thorough research of companies and periodically export trade history to protect their investor data.
Investors can learn more by visiting: https://www.cryptotax.co.in/cryptocurrency-in-a-nutshell and https://www.neumeistercpa.com/cryptocurrency-in-a-nutshell/
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