Duna DefAi

Tax Report

Comprehensive Crypto Tax Analysis & Savings Report – 2024 Tax Year
(For Filing in 2025)

Executive Summary

This detailed report analyzes your cryptocurrency gains, federal income, and tax liability while proposing strategies to minimize tax burdens within the legal framework. Specifically, we utilize your input of $289,490 short-term capital gains, $295,783 long-term capital gains, $242,291 income, filing status as "Single," and tax laws applicable to Alaska (which has no state income tax).

With crypto tax planning strategies, we aim to reduce the total tax percentage, maximize profits after tax, and propose long-term ways to optimize tax savings effectively.

Step 1: Initial Tax Calculation

A) Breakdown of Taxable Events

  • Short-Term Capital Gains (Subject to ordinary income tax rates): $289,490
  • Long-Term Capital Gains: $295,783
  • Annual Income (Non-Crypto): $242,291
    • Total Taxable Income (Before adjustments): $827,564
      (Income + Capital Gains)

B) Federal Income Tax Calculation

Using the 2024 Federal Tax Brackets (Single Filing):

  1. Short-Term Capital Gains + Income (Total $531,781):
    Since short-term capital gains are taxed at ordinary income rates:

    • Income first fits into lower brackets.
    • Remaining short-term gains are taxed using higher brackets.
    Bracket Amount Taxed Tax Rate Tax
    $0 – $11,600 $11,600 10% $1,160
    $11,601 – $47,150 $35,549 12% $4,266
    $47,151 – $100,525 $53,374 22% $11,742
    $100,526 – $191,950 $91,425 24% $21,942
    $191,951 – $243,725 $51,775 32% $16,568
    $243,726 – $531,781 $288,055 35% $100,819
    Total Tax (Short-Term + Income) $531,781 — $156,497

  1. Long-Term Capital Gains ($295,783):
    Long-term capital gains are taxed at 15% for incomes up to $518,900 as per the 2024 brackets.

    • $295,783 × 15% = $44,367

C) Total Federal Tax Liability

  • Short-Term Tax Liability (Ordinary Rates): $156,497
  • Long-Term Capital Gains Tax: $44,367
  • Total Federal Tax Liability: $200,864

D) Profit After Tax

  • Total Taxable Gains: $585,273 (Capital Gains Total)
  • Federal Tax Due: $200,864
  • Profit After Tax: $584,700 – $200,864 = $384,409
  • Percentage Paid in Federal Taxes: ( \frac{200,864}{585,273} \times 100 ) ≈ 34.32%

Step 2: Strategic Tax Saving Suggestions

Here are key strategies to optimize deductions and reduce taxable crypto liabilities:

1. Hold for Long-Term Gains

  • Currently, you have significant short-term capital gains ($289,490).
  • Holding crypto assets for over a year shifts these gains to long-term status, taxed at 15% (instead of up to 37%).
  • This can potentially save 22%-37% in taxes.

2. Utilize Tax Loss Harvesting

  • Offset gains by strategically selling underperforming crypto assets.
  • For example, if you sell crypto with $50,000 unrealized losses, you can reduce taxable gains by $50,000.

3. Charitable Donations Via Crypto

  • Donations of appreciated cryptocurrency to a qualified charity allow you to deduct its Fair Market Value (FMV) on the donation date.
  • Example: Donating $50,000 FMV crypto saves taxes proportionate to your highest bracket (35%), cutting $17,500 from your tax liability.
  • Deduct expenses associated with crypto activities (like transaction fees, mining hardware expenses, or utilities for mining).

5. Maximize IRA or Retirement Contributions

  • Contributing the maximum annual limit ($6,500 for 2024) to a Traditional IRA reduces taxable income.

6. Gifting Crypto to Family or Friends

  • Gifts under $18,000 per individual are tax-free for recipients. You avoid taxable gains, reducing reportable gross income.

Step 3: Revised Tax Calculation with Recommendations

Assuming you implement suggested strategies:

1. Tax Loss Harvesting of $50,000

  • Reduces short-term taxable gains by $50,000.

2. Donate Crypto Worth $30,000 FMV

  • Deduct $30,000 at 35% bracket, reducing taxes by $10,500.

3. IRA Contribution of $6,500

  • Reduces income taxed at 35%, saving $2,275.

Revised Taxable Income

  • Short-Term Gains After Adjustments: $289,490 – $50,000 = $239,490
  • Adjusted Annual Income: $242,291 – $6,500 = $235,791
  • New Taxable Income (Short-Term Gains + Adjusted Income): $475,281

Updated Tax

  1. Adjusted Short-Term + Income Tax Liability: $139,722

  2. Adjusted Long-Term Tax Liability ($295,783 @ 15%): $44,367

  3. Tax Deductions (Charity + IRA): -$12,775

    Revised Total Taxes Owed: $171,314

3. Profit After Revised Tax

  • Profit After Implementation: $585,273 – $171,314 = $413,959
  • Percentage Saved:
    [
    \frac{200,864 – 171,314}{200,864} \times 100 ≈ 14.71%
    ]

Step 4: Long-Term Investment & Planning Suggestions

1. Diversify in Tax-Advantaged Accounts

  • Invest in Opportunity Zone Funds for deferred gains and tax-free appreciation.

2. Consider Donating Directly to Charity from Retirement Accounts (Post-Age 59½)

  • Minimize income tax liabilities via the Qualified Charitable Distribution (QCD) strategy.

3. Roth IRA Conversions

  • Convert funds to Roth IRAs during low-income years, allowing future tax-free withdrawals.

4. Explore Crypto-Backed Loans

  • Instead of selling crypto for liquidity, utilize collateralized loans to avoid triggering taxable events.

Action Plan Summary

  1. Immediately harvest crypto losses ($50,000), to reduce gains.
  2. Donate $30,000 worth of crypto to qualified charities to maximize deductions.
  3. Contribute $6,500 to a Traditional IRA.
  4. For future tax years, hold assets for over one year to qualify for long-term rate reductions (20%-22% lower).
  5. Monitor Portfolio Diversification & Defi Staking Yields for optimized growth while delaying taxable distributions.

By strategically implementing these recommendations, you can increase your profit after tax by $29,550 and save ~14.71% in taxes.

Would you like to delve deeper into any of the strategies above?

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