Time to put on your adult pants folks, because the IRS is cracking down on digital assets this tax season. That's right, they want to know all about the digital riches you've accumulated over the past year. When it comes to digital assets, like cryptocurrency, non-fungible tokens (NFTs), and stablecoins, the IRS considers it all as taxable income. So, if you've been hodling onto or splurging on a one-of-a-kind NFT, it's time to fess up on your federal income tax return. Bitcoin Now, I know what you're thinking. "But cryptocurrencies are so volatile, I might have made a profit one day and lost it the next!" It's never been easier to get an accurate picture of your crypto tax liability. No need to pour over spreadsheets for hours trying to calculate your gains and losses. There are many ways to calculate your crypto taxes in no time. Getting back to the point. Reporting your digital asset-related income to the IRS is not only a legal requirement, but it's also the responsible thing to do. But, there are legally approved situations where your taxable income might be reduced if you own a business. Please consult with a professional lawyer before applying for any of them. 6 ways you can reduce your income taxes Deductible business expenses Some of the expenses the business pays, such as buying supplies or paying rent for the office, can be taken off the amount of money the business has to pay taxes on. This is called a tax deduction. In this case, the business expenses that are necessary for running the business and directly related to making the income can be deducted from the taxable income, which will lower the amount of taxes the business has to pay. Home office expenses If you have a home office and you use it only for work, some of the expenses related to maintaining that home office, such as electricity and rent, can be written off as business expenses. This means that you can subtract these expenses from the total amount of income you make from your business, which will lower the amount of taxes you have to pay on that income. This only works if you only use the home office for work and not for anything else. Retirement plan contributions A qualified retirement plan is a type of savings plan that is designed to help people save for their retirement. If you make contributions or put money into, this type of plan, the government will allow you to reduce the amount of income you have to pay taxes on. In other words, the amount of money you contribute to the retirement plan will be subtracted from your taxable income, which will lower the amount of taxes you have to pay. This is a way to save for the future while also reducing your tax bill today. Health savings accounts A health savings account (HSA) is a type of savings account that is designed to help people save for their healthcare expenses. If you make contributions or put money into, this type of account, the government will allow you to reduce the amount of income you have to pay taxes on. In other words, the amount of money you contribute to the HSA will be subtracted from your taxable income, which will lower the amount of taxes you have to pay. This is a way to save for your healthcare expenses while also reducing your tax bill. Charitable donations If you make donations, or give money, to a qualified charity, the government will allow you to reduce the amount of income you have to pay taxes on. In other words, the amount of money you donate to charity can be subtracted from your taxable income, which will lower the amount of taxes you have to pay. This is a way to support a good cause while also reducing your tax bill. Just make sure the charity is qualified, meaning it is approved by the government as a legitimate organization to that people can make tax-deductible donations. Capital losses Capital gains and capital losses refer to the profit or loss made from investments such as cryptocurrencies, stocks, bonds, or real estate. If you sell your crypto for less than what you paid for it, you have a capital loss. And here's the good news, you can use capital losses to offset capital gains, reducing your taxable income. Disclaimer. None of this content should be used as legal or financial advice. DYOR or contact with the lawyer before applying to anything written in this article
