The tax-loss harvesting strategy allows users who have made taxable capital gains but are now down in value to reduce or cancel their taxes!
⚠️ The tax-loss harvesting strategy is no longer available for 2022. It will be back for 2023 on October 1, 2023!
If you have lost money in crypto but have to pay taxes, this feature is for you!
I buy €60,000 of BTC.
My portfolio is worth €100,000.
I sell €25,000 of BTC.
A few months later, my portfolio is worth €20,000.
I lost money on my initial investment, nevertheless I still pay my tax on my BTC sale… It is possible to set up a tax strategy to reduce your tax!
You will find below a complete guide to use our tax strategy tool 👇
This is a full tutorial to using our tax-loss harvesting strategy
💡 For the year 2022, the tool is available until 31 December 2022.
This tool could reduce your amount of taxable capital gains and your taxation in certain situations. It's intended for advanced users who have performed a full analysis without any warnings.
⛔️ The tax strategy tool is an automatic tool, it is not a financial advice or an assessment of your personal tax situation.
You will find the tool in your reports, it will appear once your analysis is done and your report generated.
In this window, you will see the information automatically calculated when analyzing your transactions :
The total value of your portfolio ;
The amount of the capital gain;
The Total Acquisition Price (TAP) of your portfolio.
❌ If the tool tells you that no tax-loss harvesting strategy is possible:
This means that you are not eligible. This is because the tool allows you to reduce taxation by offsetting realized capital gains against unrealized capital losses on your portfolio. If you don't have any unrealized losses, then there is no possibility to reduce your taxation.
✅ The tool automatically detects the possibility to reduce your capital gain and therefore your taxable amount. Here is the explanation of the steps 👇
Here is an example:
January 2021: I bought €60,000 of BTC.
January 2022: The value of my portfolio is €100,000. I sell €25,000 of BTC – this is a taxable transaction.
November 2022: A few months later, the value of my portfolio is now €40,000. I have now unrealized losses. However, I still have to pay my tax on my BTC sale.
Step 1️⃣: The tool presents the possibility to make a taxable transaction.
In the example, the taxable transaction is in the amount of €40,000. A taxable transaction is the sale of a digital asset against a fiat/good/service.
You can therefore decide to sell cryptocurrencies for the value presented by the tool.
▶️ This transaction will create a capital loss that will offset the capital gain made earlier.
💡 If you have different amounts of different cryptocurrencies on several wallets/exchanges, you can break the transaction into several smaller transactions of different amounts. You're also free in the choice of the cryptocurrencies you want to sell.
⛔️ If you decide to do this first step, be sure that you have filled in all your transactions and wallets in Waltio. The strategic analysis is based on these data, and a mistake could distort the calculation.
Step 2️⃣: The tool presents the possibility to buy back the sold cryptocurrencies.
In this example, we have sold 2 BTC for an amount of €40,000.
However, I still want to own these BTC.
So I decide to immediately repurchase my 2 BTC that I sold.
▶️ With this process, my capital gain from the beginning of the year will be offset by the capital loss I just made, and I can own my cryptos again.
💡 If you have done the first step in split processes (multiple sales of different cryptos on multiple platforms), be very careful not to buy back the sold cryptos immediately, be sure you have fully reached the total transaction amount of step 1!
Step 3️⃣: Recover the new transactions in Waltio.
The process shown above created new transactions :
The sale of 2 BTC for €40,000 ; (single or fragmented transaction)
The repurchase of 2 BTC for €40,000.
In order for your analysis to be compliant and present you a tax report that reduces your tax liability, you must enter these transactions into the tool.
If you imported your transactions via a file, you need to add a new file to Waltio.
If you are importing via API, you can contact support to have it synchronized.
Step 4️⃣: Relaunch a new analysis and report
The new analysis will take into account the operations proposed by the strategy tool you have performed. If the process has been followed, your new analysis should present you with a report with a reduced capital gain as well as a reduced tax rate.
🎉 Congratulations, you have reduced your taxable gain : you are done 👏
If you have any other questions, do not hesitate to contact us via the chat just at the bottom right of your screen! 💬
The Waltio Team