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Author: Admin | 2025-04-28
BitGo Intro: As part of our commitment to providing investors and RIAs with valuable insights to navigate the dynamic world of digital assets, we're pleased to partner with 21Shares to bring critical insights around tax-loss harvesting to investors and RIAs. Missed our first collaboration? Watch the replay of our webinar, Diversifying Institutional Partnerships in Digital Assets, here.21Shares Intro: As part of our commitment to providing investors and RIAs with valuable insights to navigate the dynamic world of digital assets, we're pleased to partner with BitGo to bring critical insights around tax-loss harvesting to investors and RIAs. Missed our first collaboration? Watch the replay of our webinar, Diversifying Institutional Partnerships in Digital Assets, here.One of the best-kept tax secrets in crypto is tax-loss harvesting of digital assets, such as Bitcoin and Ethereum, being exempt from the wash-sale rule. But what exactly are tax-loss harvesting and the wash-sale rule? In this article, we’ll dive into these concepts and explain why tax-loss harvesting is such a powerful strategy for RIAs to consider for their crypto-invested clients to offset taxable gains or even regular income.What is tax-loss harvesting?With the growing interest in cryptocurrencies as a component of diversified portfolios, more investors are recognizing the potential benefits of including them alongside traditional investments. Due to their unique nature, digital assets are exempt from traditional wash sales rules, making understanding the tax implications of transactions, like tax-loss harvesting essential to overall portfolio management, Tax-loss harvesting is a strategy that involves realizing investment losses to offset capital gains or even ordinary income. The U.S. federal government allows investors to apply capital losses to reduce capital gains in the current tax year or carry those losses forward indefinitely. A maximum of $3,000 of capital losses each year can be used to offset ordinary income—the income earned from a job—and there’s no limit to how much capital loss can be used to offset capital gains! This can be a powerful tool to enhance a portfolio’s yearly returns.What is the wash sale rule?When investors realize a loss on an asset, they may want to maintain exposure by repurchasing the same or a similar asset. However, the government has measures to prevent investors from claiming a tax deduction while immediately reinvesting in the same security. This is known as the "wash sale" rule. Under this rule, investors cannot claim a loss for tax purposes if they buy a “substantially identical” security
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