First a little background. Crypto investors pay tax on practically everything when it comes to their crypto. If they “exchange” it, it’s taxable. If they receive a hard or soft fork (like a dividend), it’s taxable. If they use the crypto to buy goods or services, it’s taxable. And, of course, if they sell it, it’s taxable. Probably you expected that last one.
There are still a lot of questions about details fortax on crypto, which the IRS has not answered. Congress gave them a deadline of May 15, 2019 to respond or hold off on further audits if they can’t. So far, they’ve ignored Congress.
Meanwhile, an interesting tax strategy hasemerged from beleaguered communities, dealing with a decimated tax base, unemployment anddecaying infrastructure.
As part of Tax Cuts and Jobs Act (Trump Tax Plan), there was a section that talked about the Opportunity Zone Investment program. It offers investors the opportunity to postpone and even cancel out capital gains. An Opportunity Zone is a land parcel in low-income geographic censustracts that have been designated for investment opportunities and favorable capital gains treatment. To obtain the maximum tax benefit, investors must hold monies in an Opportunity Zone Fund or property for 10 years.
An interesting part of the clause is that it doesn’t mean you have to hold your position for 10 years,just that the money stays in the fund for 10 years. Who can set up an Opportunity Zone Fund?Pretty much anybody.
This is an idea that I believe is just starting to getsome traction. It can provide a big tax break for crypto currency investors.