The Ultimate Guide to Puerto Rico Crypto Tax

Learn everything you need to know about Puerto Rico crypto tax incentives and why American crypto traders should move to Puerto Rico.

Attention American crypto whales: Puerto Rico crypto tax benefits should be on your radar and here’s why:

You are a young, single, American crypto trader who is currently sitting on a ton of cryptocurrency. You’ve been at this long enough to see your potential to cash in on millions is right around the corner if you play your cards right.  

You have big and very realistic dreams of being a millionaire sitting at your fingertips as many crypto analysts anticipate the next potentially epic bull run is on its way. 

At the same time, you have been terrified by all the hype regarding the IRS crackdown on cryptocurrency.  

You are being advised not to take this crackdown lightly, and you have enough wits to know you must take these warnings very seriously by educating and preparing yourself for what’s to come. 

But, knowing that you may not have reported your past earnings correctly is sending you into a full-blown panic most days. 

You are worried about the IRS coming after your crypto earnings. And, you’re looking to save money on your tax bill.  

However, your biggest concern is making it big when the time comes to cash in your crypto.   

The best time to move is before your cryptos go up. You want the gains to increase as you are in Puerto Rico.

Your cryptos have a gain as of now, and let’s say you move to Puerto Rico today and expect them to get much higher. 

Suppose you wait until bitcoin hits $100,000. All the gain is taxed at US tax rates.

If you expect to sell crypto and avoid taxes on your earnings, you cannot wait until the end of the taxable year. You need to act now to establish your bona fide residency.   

The date you enter Puerto Rico later becomes the date you are considered a bona fide resident of Puerto Rico. 

Therefore, the gains in your crypto up until that date are still taxed by the US when sold. 

After that date, the gains in your cryptos are considered Puerto Rican sourced income and taxed at a 0% capital gains rate.  

Let’s put this all together.  

If you had a Bitcoin, you bought in 2019 and then sold in 2022 after you’ve become a Puerto Rican resident, part of the gain is taxable by the US, and the rest of the gain is taxed by Puerto Rico.  

You want to move to Puerto Rico before your coins go to the moon!

We will explain why crypto traders are moving to Puerto Rico to cash in on special tax incentives and why you need to take action now to take advantage of these tax benefits.     

Our goal is to help get you in front of this problem/opportunity, not to be the last one behind it. Read on to find out what you need to understand about Puerto Rico’s tax opportunity and how to prepare for it as of today.  

Tell Me More About The Fantastic Opportunity For Puerto Rico Crypto Tax Savings

Puerto Rico Crypto Tax

The chances are high that you’ve heard about the fantastic opportunity for US citizens relocating to Puerto Rico to reduce their corporate tax to 4% and to reduce their personal income tax on capital gains to 0%. 

You have a general understanding that Puerto Rico could be your golden ticket to savings on your tax bill. 

And you are beginning to see that the tax-free benefits of that big crypto cash out everyone is anticipating could lead to early retirement if you are living in Puerto Rico when the next bull run hits. 

Still, you are not exactly sure how you qualify for this tax saving act.

You are also unclear about the severe lifestyle changes that will need to be considered.

And most importantly, you have no idea how to prepare.  

Read on to find out how you can qualify, the lifestyle changes that you will need to consider, and how to start preparing now to make it a reality. 

I Want To Understand Puerto Rico Crypto Tax To Save Money On My Crypto Taxes In 2021 And Beyond​

Puerto Rico Crypto Tax

How Do I Save Money On My Crypto Tax Bill?

If you’re looking to save money on your tax bill, you might want to consider relocating to Puerto Rico as soon as possible.

There is no tax benefit until you arrive.

Because while you may not be unable to change how government regulators will decide to tax cryptocurrencies, you can change your tax future!  

Moving to Puerto Rico will allow you to take advantage of Chapter 2 of the Puerto Rico Incentives Code (Act 60-2019), formerly known as Act 22, to pay no federal income tax from here out. 

We know that saving money on your taxes is about one of the most substantial risk-adjusted returns.    

When is the best time to move to benefit from Puerto Rico Crypto Tax?

The best time to move is before your cryptos go up. You want the gains to increase as you are in Puerto Rico.

Your cryptos have a gain as of now.

Let’s say you move to Puerto Rico today and expect them to get much higher. 

Suppose you wait until bitcoin hits $100,000 then all that gain is taxed at US tax rates.

If you expect to sell crypto and avoid taxes on your earnings, you cannot wait until the end of the taxable year. You need to act now to establish your bona fide residency.   

The date you enter Puerto Rico later becomes the date you are considered a bona fide resident of Puerto Rico. 

Therefore, the gains in your crypto up until that date are still taxed by the US when sold. 

After that date, the gains in your cryptos are considered Puerto Rican sourced income and taxed at a 0% capital gains rate.  

Let’s put this all together.  

If you had a Bitcoin, you bought in 2019. 

And then sold in 2022 after you’ve become a Puerto Rican resident.  

Part of the gain is taxable by the US, and the rest of the gain is taxed by Puerto Rico.  

You want to move to Puerto Rico before your coins go to the moon!

Can I Move To Puerto Rico To Avoid Taxes?

You can avoid tax by moving to Puerto Rico through one of the tax programs, formerly named Act 22 (now referenced as Chapter 2 of the Puerto Rico Incentives Code (Act 60-2019). This Act requires that you have NOT lived in Puerto Rico during the previous 15 years. Therefore, allowing you to take advantage of a 4% income tax rate, 0% dividend rate, and 0% capital gains tax rate. 

Please be aware that BOTH YOU and YOUR BUSINESS need to make a literal move to Puerto Rico. It has to become your “tax home.” Later, we talk about making closer connections to Puerto Rico than the United States. 

Why Should You Move To Puerto Rico?

Act 22 was born as the Resident Individual Investor Act. It was enacted in Puerto Rico in 2012 to promote the relocation of high-net-worth individuals to Puerto Rico. The law’s goal was to provide attractive incentives to encourage investors to relocate to Puerto Rico. 

It has since been updated and bundled with other popular tax incentives and now called Act 60-2019, replacing the name Act 22 into law on July 1, 2019, with an effective date of January 1, 2020. 

*Please also note that new applicants will be subject to the most recent requirements from January 1, 2020.  

Puerto Rico has a unique tax status.   

It is a US territory, but it is viewed as a “foreign country” for US federal income tax purposes. 

Therefore, an individual tax applies to its residents and tax incentives geared to promote its economic development that may be very luring for US Crypto Traders.

If both you (as a bona fide resident) and your business (as your tax home) move to Puerto Rico—

“Then all your future capital gains on stocks, bonds, and other assets as defined to include commodities, currencies, and any other digital asset or blockchain technology, a.k.a. Crypto becomes tax-free.

In short, all your dividends, interest, and royalties you may receive from Puerto Rican sources become tax-free.” (1)

What Was Puerto Rico’s Act 22, And What Is It Called Now?

Puerto Rico’s Act 22 was the Act to Promote the Relocation of Individual Investors to Puerto Rico. It has since been updated and bundled with other popular tax incentives and now called the Puerto Rico Incentives Code (Act 60-2019) referenced in Chapter two. It is replacing the name Act 22 with Act 60-2019 as the law on July 1, 2019, with an Effective Date of January 1, 2020.  

*You will be obliged to follow the most recent requirements applying as a new bona fide resident.

It intended to attract new residents to Puerto Rico by providing a total exemption from Puerto Rico income taxes on all interest and dividends earned AFTER the individual becomes both a bona fide resident of Puerto Rico. Along with filing their business in Puerto Rico, as their tax home.

What Are The Benefits Of Chapter Two Of Act 60-2019, Formerly Known As Act 22?

  • 100% tax exemption on interest and dividends derived, AFTER becoming a Puerto Rico resident and through December 31, 2035. (2)
  • 100% tax exemption from Puerto Rico income taxes on all capital gains accrued, AFTER establishing residency. (2)
  • 100% tax exemption concerning gains from the sale of property acquired AFTER the individual becomes a bona fide resident of Puerto Rico if the sale takes place before January 1, 2036. (2)
  • Investment income accrued before becoming a bona fide resident of Puerto Rico will be taxed at 10% if realized within ten years after residency is established. If the gain is achieved after the ten years, but on or before December 31, 2035, the tax is 5%. (2)
  • Capital gains appreciation on investments that occur after becoming a bona fide Puerto Rico resident can allocate to Puerto Rico.

Special rules apply to the gain from the sale of securities acquired before establishing residence in Puerto Rico.

We asked Juan Robles, CPA Partner Etrends Group, about these special rules. 

Robles states that:

“Any appreciated property acquired in the US and later sold while a PR resident will still have US tax implications. For US tax purposes, virtual currency is treated as property, and US Regulation Section 1.937-2(f) provides that any gain may be subject to an allocation based on holding period (bifurcation rule)”  

What Is Act 60-2019?

“The Governor of Puerto Rico signed into law the Puerto Rico Incentives Code as Act 60‐2019 (the “Incentives Code”). In general, the Incentives Code compiles into a single code many of the Puerto Rico tax incentives laws used to promote the island’s economic development, with some modifications, to establish a new transparent and efficient process for granting and overseeing all the incentives afforded under the Puerto Rico’s incentives laws. 

The Incentives Code consolidates various tax decrees, incentives, subsidies, and benefits, including Act 20, the Promotion of Export Services Act, and Act 22, the Act to Promote the Relocation of Individual Investors to Puerto Rico.” (3)

I Want To Understand The Lifestyle Changes That I Need To Consider By Moving To Puerto Rico.

Puerto Rico Crypto Tax

I’m not a crypto billionaire. Do Puerto Rico’s tax incentives still make sense for me?

Yes! You may not be a crypto billionaire yet, but plenty of you are sitting on a lot of crypto that you want to sell when it’s worth it. Many crypto traders are going to Puerto Rico with the anticipation of becoming a crypto billionaire.  

Cryptocurrencies and other crypto assets are explicitly included as eligible for tax exemption.

And, there is no better risk-adjusted return than saving money on taxes. Gain an extra 30% return on investment without the risk by saving on your taxes. Compounded over your lifetime, that is a considerable amount of savings for changing nothing but the place you legitimately call home.

Do You Have To File Taxes If You Live In Puerto Rico?

Yes, residents of Puerto Rico pay federal payroll taxes, such as Social Security and Medicare taxes.  

“PR source income earned by US citizen or resident alien is excluded from US taxes (US Code Section 933 exclusion)” 

-Juan Robles, CPA Partner Etrends Group

“Any PR resident that has US source income must file federal taxes.”

-Juan Robles, CPA Partner Etrends Group 

I Want To Start Preparing Now To Make Saving On My Puerto Rico Crypto Tax A Reality.

Puerto Rico Crypto Tax

What Is The First Action Step To Take?

The first and most critical step is wrapping your head around how fast you have to make this happen if Puerto Rico is the right move for you.  

You want to be a bona fide resident of Puerto Rico to save on your tax bill.

Crypto Traders need to understand what rules they need to comply with to take advantage of this opportunity legally.

  • They must thoroughly understand residency compliance and form a closer connection to Puerto Rico than to the US For more information, consult the Etrends Group in Puerto Rico.

How Can You Prepare For This Move To Puerto Rico?

  • You must become a bona fide resident of Puerto Rico.
  • You must create closer connections. Meaning, you must create “closer connections” to Puerto Rico than the United States.

How Long Do You Have To Live In Puerto Rico To Be A Bona Fide Resident?

Generally, you must reside there for at least 183 days a year. There are many grey areas and nuances that you want to be clear on if you will take this step, so be sure to position yourself with the right team of Crypto Tax Law and Puerto Rico tax experts from the start. You also have to do the paperwork, applying with the tax authority there.

An Act 22 Decree application must include the payment of a $750 filing fee, but do expect to invest thousands more into applying and relocating yourself here.  

What Is A Bonafide Resident Of Puerto Rico?

A bona fide resident of Puerto Rico can exclude their Puerto Rico source income from US federal tax. Generally, under IRS §937 and the regulations thereunder a bonafide resident of Puerto Rico is an individual who:

You must qualify as a bona fide resident of Puerto Rico FOR THE ENTIRE TAXABLE YEAR for the US IRC’s purposes and (2) the income must constitute Puerto Rico source income under the US IRC.

Please note the wording to qualify for the exclusion for a taxable year. You must be a bona fide resident of Puerto Rico for the “Entire Taxable Year.” 

You will have to have been in Puerto Rico one full taxable year. 

Again, you must generally be physically present and living in Puerto Rico for AT LEAST 183 days during the taxable year.

You must not have a tax home outside of Puerto Rico during the taxable year.

You must pay an annual charitable contribution for a non-profit entity of $10,000. It must be paid annually under the new Act 60-2019.

You must purchase property in Puerto Rico within two years of obtaining the decree under the new Act 60-2019.   

This property must be your primary residence throughout the validity of the decree. You must hold exclusive and complete ownership of the residential property for the duration of the decree. Joint ownership with your spouse qualifies. 

You cannot rent the property out to someone else.  

The determination of whether or not an individual is a bona fide resident of Puerto Rico for a taxable year is made according to rules outlined in the regulations issued under Section 937(a) of the US IRC.

You must not have a closer connection to the United States or a foreign country than Puerto Rico.  

How Do I Create Closer Connections To Puerto Rico?

For example, 

  • Where is your bank account?  
  • Where is your driver’s license?  
  • Where are your relevant documents located?   
  • Where is your high school diploma? Your college degree?  
  • Where are your wife/husband and children living?  
  • Where does your mail go?
  • Where are your investments?  
  • Where do you own your house?

If you have answered the US, you have not created closer connections to Puerto Rico than the US Make sure that you are moving your real life to Puerto Rico.  

There are various factors that the individual must meet to qualify as a “bona fide resident of Puerto Rico.” 

They can be extraordinarily intensive, and a variety of factors will be considered.

Therefore, individuals seeking to take advantage of these benefits should consult with our Crypto Tax Specialist, Clinton Donnelly, and Puerto Rico Tax Experts Etrends for clarity and guidance.  

What Is Law 40-2020?

On April 16 Puerto Rico Governor Wanda Vazquez approved, Law 40-2020, that alters the way tax incentives are provided to new residents. The previous annual fee of $300 for those who moved to the island and applied for the incentive has been substantially increased. It has now jumped up to $5,000. A new tax contribution deduction is equal to 3% for anyone who earns $100,000 or less.  (5)

“There is some lobbying going on related to the increase of the filing fee charge. As it stands today (May 25, 2020), it applies to all Act 22 holders.

The additional 3% income tax reductions apply to tax years 2020 and forward.” – Juan Robles, CPA Partner  Etrends Group

To summarize total costs, including Law 40-2020:

Now, for anyone wishing to move to the island, the upfront expenses are much higher, somewhat negating the existing tax incentives. There is a $750 filing fee, a $5,000 “special fund fee” if the filing application is approved, a $10,000 obligatory annual contribution (with the possibility of having the fee made in two payments), and the new $5,000 fee. (5)

On the bright side, conditions for Act 20, known as the Export Services Act–now part of Chapter 3, Incentives for Export Services– remained largely the same. (1)

Under the new rules, If your Act 20 company churns $3,000,000 (or more) of revenue a year, you will need to employ a full-time employee in Puerto Rico. And that single employee can be you actively managing your business. (1)

What Does A  Membership Do To Protect You From The IRS In Puerto Rico And On The Mainland?

Just because you are in Puerto Rico doesn’t mean you are exempt from US audits. As long as you are a US citizen, you do not escape the eye of the IRS.

Regardless of where you live in the world, you need to file an income tax return with the US as a citizen of the United States. Going to Puerto Rico doesn’t mean you don’t have to file a US income tax. 

If you make less than $12,000, you don’t have to file a tax return. But, if you are still making an income above $12,000 worldwide after subtracting Puerto Rican income, you will have to file a tax return in the US. 

Therefore, you want assurance that you have crypto representation should you get the IRS’s dreaded letter.  

Our goal is to help get you in front of this problem/opportunity by using annual tools like CryptoTaxAudit to provide you with representation as long as you are a member should you need representation with the IRS.


Well done! By reading this post, you have already taken the first step toward understanding an excellent solution to protect your future Crypto earnings in light of the current IRS crackdown on Crypto earnings.  

You have also come one step closer to having an action plan to realize your dreams of becoming a Crypto millionaire when the next potential epic bull run hits.

Your potential to cash in on millions is right around the corner if you play your cards right.  

Remember, if you expect to sell crypto and avoid taxes on your earnings, you cannot wait until the end of the taxable year. You need to act by July 2 to get your 183 days in Puerto Rico.

Our goal is to help get you in front of this problem/opportunity by using CryptoTaxAudit tools to provide you with representation should you need it with the IRS.  

Donnelly Tax Law is the leading US tax firm for preparing complex US tax returns for Americans, including Crypto Traders and people with foreign assets. 

We are currently partnering with a Puerto Rican tax and accounting firm, Etrends Group, for Act 22 clients

Sign up for our newsletter and get our free download This Deadly Crypto Mistake Could Cost You $10K!.

Crypto Owners Terrified Of New 1040 Tax Question

Crypto Owners are terrified of the new Form 1040 tax question. Find out what you need to know and how you can start taking action to protect yourself today.

Crypto owners are shocked to see that the IRS has revised the 1040 tax form for 2020 to include the question:

At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? Yes or No1

This question appears on the top of Form 1040 immediately after your name and address. 

Every taxpayer must answer this question, and it is causing a lot of fear.

The IRS had a similar question in 2019 on Schedule 1 of Form 1040. 

However, only taxpayers filing Schedule 1 had to answer the question.

Neither The Tax Law Nor The IRS Regulations Have Defined Virtual Currency For Crypto Owners

crypto owners

Virtual currency is not defined in the tax law nor the IRS regulations.

The IRS started using the term virtual currency in 2014. 2

The new 2020 Form 1040 Instructions explain:

Virtual currency is a digital representation of value, other than a representation of the U.S. dollar or a foreign currency (“real currency”), that functions as a unit of account, a store of value, or a medium of exchange…. Regardless of the label applied, if a particular asset has the characteristics of virtual currency, it will be treated as virtual currency for Federal income tax purposes.” 3

This definition classifies all cryptocurrencies as virtual currency. 

Are there other fish caught in this net?

You bet there are!  

And it is vital that all crypto owners understand a crucial point when it comes to how the IRS defines cryptocurrency.

What All Crypto Owners Should Know About The IRS Definition Of Virtual Currency

The same definition the IRS is classifying for cryptocurrencies also classifies: frequent flyer miles, grocery store loyalty cards, and credit card reward points are all forms of a digital representation of a store of value. 

These are all forms of virtual currency.

What Do These Various Forms Of Virtual Currency Mean For Crypto Owners?

crypto owners

Almost every taxpayer has a financial interest in some form of virtual currency, by the IRS definition. 

Meaning, almost everyone should answer YES to this question, even if you don’t own cryptocurrencies.

By elevating the virtual currency question to the start of Form 1040, it is causing crypto owners a lot of fear. When you sign your tax return, you are swearing:

“Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete.”

Why Is Answering The New Form 1040 Question Terrifying Crypto Owners?

crypto owners

If you answer the virtual currency question falsely, you could be charged with perjury. 

Lawyers call this a “perjury trap.”

Yet, most observers feel the IRS has not provided adequate guidance for taxpayers to know how to report their cryptocurrency income, especially in light of DeFi innovations. 

The Government Accounting Office (GAO) asserted that the IRS could do more to help taxpayers comply. 4

Is There More Than One Perjury Trap For Crypto Owners?

Yes, there is!  

Another perjury trap is question 7a on Schedule B of Form 1040, which asks:

“At any time during 2020, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country? See instructions Yes or No.” 5

Foreign crypto exchanges appear to qualify as a financial account described in this question. 6

In February 2020, the same GAO report recommended that the IRS & FinCEN make a statement about applying foreign account reporting requirements to virtual currency. 

FinCEN agreed with this recommendation. 

What did the IRS do?

The IRS had no comment. 

Where Is All The Much-Needed Regulation For Crypto Owners?

As of today, December 16, 2020, neither FinCEN nor the IRS have provided additional guidance. 

However, the absence of guidance for crypto owners is not a valid excuse for failing to obey the law – ignorantia juris non excusat.

What Does Failure To Report Foreign Accounts Mean For Crypto Owners?

Failure to report foreign financial accounts when required is a $10,000 penalty per account per year. 

The conservative approach is for a taxpayer to report foreign crypto accounts on the FBAR FinCEN Form 114 and IRS Form 8938 (FATCA).

"Crypto Tax Tip: there is little downside to overreporting on anti-money laundering forms: FBAR FinCEN Form 114 and IRS Form 8938 (FATCA)."​

The escalation of the virtual currency question without adequate IRS guidance is causing taxpayers to be anxious. 

Many crypto owners are asking if they need to fix past tax returns.

Donnelly Tax Law Has Solutions For Crypto Owners, No Matter What Your Budget

crypto owners

The IRS is already cracking down on crypto owners, and we have solutions available to empower all crypto owners, no matter what your budget.

Everything Crypto Owners Need To Amend And File Past Crypto Tax Returns

crypto owners
  • You can learn how to amend and file your past crypto tax returns with our downloadable examples and templates using the Crypto Tax Fixer package.

A good crypto tax return involves not just general tax preparation skills; you have to have accounting skills to do the reconciliation of all the trades. 

A good crypto tax preparer also needs to have legal skills because the anti-money laundering forms are law-oriented. 

When we do a tax return at Donnelly Tax Law, we call it a bulletproof crypto tax return. 

Not only do we report all the income, but we also report all the anti-money laundering forms.

We report any Ponzi scams or financial scams where you lost money because you can itemize the loss and reduce your taxes. 

If you have ICOs and dead coins and junk coins that went nothing, we can declare a loss on those and bring in some savings.

For most clients who come to me, we have to go back and fix a couple of years’ worth of returns. 

So we do a tax amnesty form.

Because if you report the anti-money laundering forms after the deadline, which is the same day as taxes are due, it’s a $10,000 penalty.

Schedule a one-to-one consultation today at Donnelly Tax Law.

Crypto Tax Audit Defense Membership Is The Best Investment For At-risk Crypto Owners​

  • If you are a crypto owner and haven’t protected your most significant bullish assets with crypto tax audit defense, give us this opportunity to enlighten you with just three reasons why you should.

No crypto tax return is too complicated.  

We’ve got your back.

1 Draft 2020 Form 1040 <–dft.pdf > released August 18, 2020.

2 IRS Notice 2014-21 <>

3 Draft 1040 Instructions < >, released December 15, 2020, p 15.

4 GAO, “Virtual Currencies: Additional Information reporting and Clarified Guidance Could Improve Tax Compliance. < >2/12/2000, GAO-20-188

5 Schedule B <>

6 18 CFR 1010.350 (c)(3)

3 Reasons Why Crypto Traders Should Have Crypto Tax Audit Defense

Crypto Tax Audit Defense Membership is the best investment for your crypto assets if you are at risk with the IRS. Find out why most medium-to-large crypto traders are.

This post has been moved to our CryptoTaxAudit blog.

The Long And The Short Of Crypto Capital Gains Taxes

Learn which crypto capital gains tax is the most significant tax break in the federal tax code for crypto owners.

Did you know that one of the most significant tax breaks in the federal tax code is the long-term capital gains tax rate on property?  1

And for the record, cryptocurrencies are considered property.

So if you are a crypto owner, that probably got your attention. 

Heading into 2021, you’ll be yearning for more transparent tax regulations to guide you through your crypto investments.

Well, I’ve got one for you.

Today, I will discuss the long and short-term effects of capital gains taxes for your virtual currency.

What Are Crypto Capital Gains Taxes?​


When you sell property (cryptocurrencies), the price you sold it for minus the price you paid for it is called the gain. In contrast, it is called a loss when the gain is negative.

For tax calculations, all your gains and losses are added together to get the net gain. 

The good news is that Congress rewards investors by taxing long-term gains at a much lower tax rate to encourage long-term investing.

So what are those anyway?

What Are Long-Term Crypto Capital Gains Taxes?

Crypto Capital Gains Tax

If you own property for over a year before you sell it, it becomes a long term investment. Property sold before the year is up is called short-term investments or gains.

How Are Short-Term Crypto Capital Gains Taxed?

All the short-term gains and losses are combined to get the net short-term gain. Short-term gains are taxed as ordinary income at your marginal tax rate (10%, 12%, 22%, 24%, 32%, 35%, or 37%).

How Are Long-Term Crypto Capital Gains Taxed?

All the long-term gains and losses are combined to get the net long-term gain. Long-term gains are taxed at a special rate (0%, 15%, or 20%).

When You Have Negative Crypto Capital Gains Taxes (Net Losses), How Is It Taxed?

Crypto Capital Gains Tax

When net short-term gains and net long-term gains are added together, resulting in a negative amount (net loss), a special tax rule kicks in. A taxpayer can only claim $3000 of loss on their tax return. The remainder is carried over or saved for the next year to offset future gains. 

The silver lining here is that the $3000 of loss reduces taxable income and thus your taxes.

When Do I Qualify For A 0% Crypto Capital Gains Tax Rate?

If your taxable income (your income after deductions) is zero or in the lowest tax bracket (10%), then the first $54,100 of net long-term capital gains if single, or $80,800 if married, is taxed at 0% long-term capital gains. 

Please take note: these rates I am discussing are the 2021 rates.

When Am I Subject To The 20% Crypto Capital Gains Tax Rate?

Almost everyone else enjoys the 15% long-term capital gains tax rate. However, if your taxable income puts you into the highest tax bracket of 37%, your long-term capital gains tax rate increases to 20%. The 37% tax for 2021 starts when income exceeds $523,600 if single or $628,300 for married filing jointly.

Wait, there’s more and something for the medium to large investors to be aware of…

What Is The Net Investment Income Tax?

As a part of the Obamacare tax, taxpayers with capital gains (passive) income above $200,000 (single) or $250,000 (married) also are subject to the Net Investment Income Tax (NIIT)

NIIT is an additional 3.8% tax on the passive income over the thresholds.

A Final Note For Medium To Large Crypto Owners


One last note, If you expect to have crypto assets worth over $150,000, you may want to consider our CryptoTaxAudit Defense Membership a good investment for you.

Be sure to keep up-to-date with our emails. We will continue to have some insight that you should consider for protecting yourself against an IRS examination. 

1  IRS 2014-21

Remember to follow me on Social Media

4 Ways Marriage Affects A Newly-Wed Crypto Trader’s Tax Situation

Learn how marriage can affect your tax situation as a newly-wed crypto trader and what you need to do first.

You’ve had a good run being a single crypto trader, but the day has come that you’ve happily entered new waters as a newly-wed crypto trader.

You’ve met the person of your dreams, and life has changed in more ways than just one.

The last thing on your mind has likely been how your new marriage affects your crypto tax situation.

Here Are 4 Ways Marriage Affects A Newly-Wed Crypto Trader’s Tax Situation And What You Need To Do:

1) Avoid delays on your tax refund resulting from your new name and address changes.

newly-wed crypto trader

Your new name (or partner’s new name) through marriage must be reported to the social security administration to avoid delays on your tax refund. The name on your tax return must match your social security card; if these do not match up, it could cause delays in your tax return.  

You can update your married name by filing Form SS-5, called Application for a Social Security Card. You can find this form on or by calling 1-800-772-1213.  

If you have a new home address after your wedding day, you must also update your IRS records with Form 8822, called Change of Address on, and be sure to forward your mail through your local United States Post Office by visiting the change of address link at

2) Make sure you are in the correct tax bracket as a newly-wed crypto trader.

newly-wed crypto trader

If you and your spouse both work, then you may move into a higher tax bracket. You may also be affected by additional medicare tax. You can find out more information by using the Tax Withholding Estimator at or reading more on publication 505.  

Newly married couples must also complete a new Form W-4, called Earning Withholding Certificate for their employers at within 10 days of marriage.

3) Maximize your filing status with your newly-wed crypto trader status.

Filing jointly as a married couple could prove to be more beneficial than filing separately. Now is the time to figure out which way will suit you best and make the appropriate changes. The law says if a couple is married by December 31st, then they are considered a married couple for the entire year for tax purposes.

4) Stay clear of sneaky tax scams as a newly-wed crypto trader.

crypto tax returns

It’s important to note that the IRS will never email, phone calls, social media, or text messages. If you receive an alert in this capacity, you should beware it could be a scam. The best avenue for checking for updates if you are concerned about your tax account is logging directly into to see if you owe any money.

Need Crypto Tax Help?

For any questions or problems about your crypto tax return or schedule an appointment, go to

Follow Me On Twitter

Temporary IRS Tax Debt Relief For US Taxpayers With A Balance Due

Learn how US taxpayers have had a temporary pass on their outstanding IRS tax debt since the end of August.

Relief from your IRS tax debt is on the way, but for an unknown period.  

If you owe the IRS, then you’ll want to shout this IRS tax debt relief from the rooftops.  

In a time when the IRS has ramped up resources in every which way but loose to hone in on owners of virtual currency, they have temporarily loosened up on those taxpayers who need some IRS tax debt relief.

If you are a taxpayer who currently has an outstanding balance with the IRS, you can take a deep breath.

Why do US taxpayers currently have some IRS tax debt relief?

On August 21, 2020, the IRS announced that they temporarily halted the mailing of three notifications typically sent out to taxpayers with balances due to reduce the backlog of unopened mail that mounted while most IRS operations were closed due to COVID-19.

How can I expect to receive this temporary IRS tax debt relief?

The announcement read like this:

“The IRS has temporarily suspended the mailing of three notices to taxpayers who have a balance due on their taxes. The suspended notices are (1) CP501; (2) CP503; and (3) CP504. However, the IRS has informed taxpayers and tax professionals that some of them might still receive these notices during the next few weeks due to the delivery of existing mailings. The IRS is working to stop these mailings at their processing centers.”

What are these three IRS tax debt notices all about?

IRS tax debt

They are a series of letters sent to taxpayers who have debt with the IRS.  

These letters are sent in sequential order with escalating threats for those who have failed to pay back what they owe to the IRS. 

The first letter sent is called a CP501 Notice. The taxpayer is informed that they have a balance due (money owed to the IRS) on one of their tax accounts.

If there is no action taken, a second letter is sent called a CP503 Notice. The taxpayer is informed that the IRS has not heard from them with a reminder that they still have an unpaid balance on their tax accounts.  

The third and most threatening notice is called the CP504 Notice. The taxpayer is once again told they have an amount due to their account. This time they are told if they do not pay the amount due immediately, the IRS will seize (levy) their state income tax refund and apply it to pay the amount still owed to the IRS.

Which tax debt relief letter am I happiest not to receive?

IRS tax debt

This third, most threatening letter is of particular interest. CP504 is the biggie. It is the threat of a levy in 30 days.

If you fall into this category and have been worried about having to take immediate action on your tax debt, you can breathe a temporary sigh of relief.  

While there has been no timeframe set for these three letters’ temporary suspension, I think this is an effort by the Dept of Treasury to stop the escalation of debt issues, especially since this is an election year.

Nonetheless, it is excellent news for the millions of taxpayers who have 2019 debt that they can’t pay because of the lousy economy.

What can I do if I have a question about IRS tax debt?

If you have a tax question, you can schedule a call on our Donnelly Tax Law website.   

If you are a crypto owner worried about getting a crypto tax audit, we have put together three exciting monthly memberships to put your mind at ease so you can sleep again.

Follow Me On Twitter

Get Our Newsletter

Newsletter Signup for Do Nothing Subscribers
What tax topics are you interested in?

Your information is safe with us. By subscribing you are opting in to our mailing list and agree to our privacy policy, which you can click here to read.